The spot rupee closed at 46.68, weaker by another two paise from Tuesday's close, while overnight call rates shot up. Forwards rose across the board in tandem with bond prices which staged a rally.
The local currency opened weaker by about six paise and plummeted to the day's low of 46.72 after a large public sector nationalised bank bought dollars. "There was good corporate demand in the morning and considerable selling in the afternoon," said a dealer with a private sector bank.
"The market was flow-driven but generally remained quiet. There was an all-round buying spree. The spot rupee remained weak on account of high overnight call rates," said a dealer with a foreign bank.
The spot rupee should remain range-bound between 46.68 and 46.72 tomorrow. The Reserve Bank of India (RBI)'s reference rate is at 46.69 as against 46.65 on Tuesday.
Forward premiums rose substantially with the bond prices staging a rally of about 10 to 15 paise. The six-month (annualised) closed at 4.21 per cent as against 4.04 per cent on Tuesday. The one-year forward premium (annualised) also closed higher at 4.15 per cent as against 4.12 per cent on Tuesday.
"Liquidity has been pulled out of the system. So for the next few days there should be some tightening. Forward premiums were biddish through the day due to high call rates," said a dealer with a foreign bank.
Near-term premiums closed 3 to 4 paise higher while the far forwards closed about 5 to 6 paise higher. Overnight rates shot up because of the lack of liquidity which is being sucked out of the system since Monday. Most dealers felt the bond market heated up because of this.
Forward premiums should remain bid for the next few days due to liquidity concerns and high call rates.
