Weekly Forex Market Report : Aug 28th - August 31st

The forex market saw an uptrend in the rupee value this week over the last week. The rupee, which started at 45.845/855 this week closed at 45.765/775. In the first half of the week, rupee stood stronger and almost stable for the remaining part. The whole week observed the selling of dollars by the exporters and foreign funds. Since the importers had already met their month-end dollar targets, there was less dollar buying interest from them. On the good collection of dollars in the last week, exporters expected that there would not be rupee depreciation any more and almost the rally of selling dollars went on throughout the week. RBI had cut yields by 25 basis points on the one-day repo and 50 basis points on the six day repo, which helped the forward premiums. It was also expected that there would be higher inflow of dollars in the next week as FIIs would take long positions in the stock market. The detailed report follows:

Thursday, 31st August

The rupee ended stronger on Thursday at 45.765/775 stronger by about 4 paise from its previous close of 45.80/815. The rupee opened at 45.79/81 and remained static for quite a long time. There were good dollar sales from exporters and few banks also had unwound their long dollar positions, which helped the rupee to strengthen. There was little demand from importers as most of them already met their month end dollar buying. The sentiment on rupee turned bullish and was expected to further strengthen during next week on expectation that FIIs will bring in more dollars into stock markets. Forward Premiums softened after RBI cut yields by 50-75 basis points at repo auctions.

Wednesday, 30th August

The rupee ended at 45.80/815 with a marginal change from its previous close of 45.785/79. The rupee opened at 45.82/85 and slipped to an intra day low of 45.88 but the importer cancellations and dollar inflows from FIIs helped the rupee recover. The weak opening was due to adjustment for a shift in the spot settlement date due to an extended weekend. RBI had cut yields by 25 basis points on the one-day repo and 50 basis points on the six day repo, which helped the forward premiums from large fall. Friday, being a holiday in Mumbai and next Monday, a holiday for US markets, the spot settlement is shifted to next Wednesday.

Tuesday, 29th August

The rupee ended at 45.785/79 barely changing from its previous close of 45.775/785. The rupee opened at 45.75/77 and slipped to an intra day low of 45.82 on month-end demand and recovered soon after the foreign banks started selling dollars. The traders who sold dollars to take advantage of the high weekend differentials covered short positions which drove rupee down to some extent. In the forwards segment, premiums dropped in the morning trades but rose towards the close due to month-end roll over pressure.

Monday, 28th August

The rupee gained almost by 7 paise from its earlier close of 45.845/855 in the previous week. The rupee opened at 45.85/88 and immediately strengthened as exporters and foreign funds sold dollars and closed at 45.775/785. Due to the selling form both exporters and foreign funds, the importer demand was felt thin. The selling pressure was felt as the exporters felt that there would not be rupee depreciation any more and would stabilize within the range of 45.75-45.85. Banks were also involved in selling dollars to take the advantage of swap differentials.

K.Venu Babu