The spot rupee, on Friday closed at 45.79 as against its previous close of 45.89, appreciating by 10 paise against the dollar. The supplies last week remained thin despite the Reserve Bank of India (RBI) circular instructing the corporates to bring in 50 per cent of their dollar denominated earnings kept in exchange earners foreign currency (EEFC) balances abroad.
"The spot rupee opened at 45.90, a paisa lower from its previous day's close and slid on the back of good demand and very little supply forthcoming. It touched an intra-day low of 45.95, at which point the RBI began making inquiries. This helped the rupee recover and strengthen by the close," said a dealer with a new private sector bank.
Despite the last date for this drawing closer (August 23), the supplies remained scant. With Monday being a holiday and the last date drawing closer, Tuesday (August 22) should be the day when most supplies will flood the market.
It is expected that though during the initial part of the week the rupee would appreciate against the dollar, the latter half may see the rupee falling again due to a dearth in supplies.
The demand for the dollars should remain good, causing the rupee to test lower levels. But with fresh supplies coming in to the market early in the week the rupee should remain range bound.
The forwards should remain range bound with the near termed forwards being bid due to the volatility in the spot rupee.
On Friday, the premium on the six month forward (annualised) closed at 4,75 per cent, as against 4.68 per cent on Thursday.
Importers are advised to stay from the market until this volatility on the spot rupee continues. If the spot rupee dips, which may be the case early in the week, importers should sell. Exporters can book on high level of the spot rupee, especially if it sees intra-day lows of 45.95-98, as was on Friday.
