MUMBAI, December 10: The tight measures initiated by the Reserve Bank of India in the last one month have pushed up the premium in the forward dollar segment of the foreign exchange market. While premium on one-month forward was 9.10 per cent (annualised), six-month forward premium was 8.45 per cent.

In the spot dollar segment, after opening at Rs 38.97/99 against the dollar, the rupee weakened to cross the Rs 39-mark to trade at Rs 39.02/04 against the dollar. Dealers say that the State Bank of India entered the market to sell dollars which saw some stray deals being struck at Rs 38.99.

The 55 basis points rise in six-month forwards has come about after the RBI governor Bimal Jalan hiked short-term interest rates in the money market to curb speculative activity in the foreign exchange market. In a related move, the RBI hiked the four-day fixed repo rate to 7 per cent from 6.5 per cent on Wednesday which will drive the near-term forward rates higher up.

Dealers said that the RBI move to hike the repo rate to 7 per cent is likely to drive the one-month forward rates to 10 per cent while six-month forwards are set to touch 8.7 per cent. "One month forwards are dearer because the RBI has given a clear signal that short-term interest rates will be pegged higher than the medium-term ones," said a dealer.

Dealers also pointed out that some banks are still arbitraging between the local forex market and money market.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.