Forwards zoom to 18%, spot Re down by 10 paise
Our Banking Bureau
Mumbai, Jan 20: Nervousness gripped the forwards segment of the foreign exchange market with six-month forwards soaring to touch 18 per cent (annualised), while the January premia peaked at 57 per cent. The spot rupee also lost ground and closed marginally weaker at 39.08/18-10 paise weaker than yesterday's close.Overnight rates continued northward in the call money market. Opening at 45-50 per cent, the overnight call rates softened to 20 per cent, but tightened as some small banks went on a borrowing spree. The rates closed at 40-45 per cent levels today--20 per cent higher than yesterday's close. The gilts market stayed dull, but some banks did show buying interest in some of the securities. The spot rupee opened at 39.10/18 level, but strengthened on exporters unwinding their dollar positions in the morning. At one time, the rupee was trading at 38.60/65 and was all set to touch 38.50. "But importers came and started buying dollars, which led to a lot of pressure on the rupee. In a thin market, a
small demand for dollars is weakening the rupee," a chief dealer in a private sector bank said. The dollar finally closed at 39.08/18. Dealers said that bearish sentiments about the rupee had still not vanished. "There was demand for dollars as importers thought it was the right level to buy dollars," a dealer in a foreign bank said. But treasury chiefs are of the view that small volumes are impacting prices significantly because the Reserve Bank's measures have made the forex market very shallow. In the forward segment, rates moved in tandem with call money rates. "There was a lot of pressure on the forwards towards the end of the day," a dealer in a foreign bank said. Initially during the day forward premiums had come down, but increased demand from exporters to cover coupled with import cancellations saw six-month forwards soar to close at 18 per cent. January-end premia crossed the 50 per cent mark to close at 57 per cent and one-year premia (annualised) closed at 16 per cent-300 basis points
costlier than yesterday. Dealers said that it will take some time before the forwards settle at lower levels. "As soon as the call rates settle at 15-20 per cent levels, the forward rates will come down," PH Ravikumar, executive vice president (treasury) at ICICI Bank, said. According to him, players are still not certain about the rupee stability, which is the cause for the nervousness. In the call money market, institutional lenders like ICICI, IDBI and Unit Trust of India (UTI) refused to lend below 40 per cent. This saw call rates closing at 40-45 per cent levels after dipping to 20 per cent during the course of the day. Gilt prices remained stable on a lacklustre day, but banks are slowly showing some buying interest, dealers said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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