Weekly Forex Market Report : Dec 11th - 15th

The rupee was almost flat through out the week. It opened at 46.75/76 and ended at 46.76 /77, with a loss of   just 0.01 paise in the week. There seem to be a positive sentiment on the rupee backed by new high of $39.021 billion and the downward trend in the global oil prices and also on account of the euro strengthening against the dollar to a three-month high. With economic growth in the US having slowed, the dollar has also begun slipping against the euro. Markets expect the euro to further gain against the dollar over the next couple of months.  Global oil prices fell by $2 a barrel to $25 after Iraq resumed its exports of crude oil. If the current trend in oil prices continues, it is expected to see a further fall in oil prices by March next year. There was activity in the cash segment in the swap market after several weeks of steady levels and low turnover. The cash-over-spot (Tuesday to Thursday) premium on the dollar went up to 0.60 paise from normal levels around 0.40 paise on paying (sell-buy swaps) by banks. Foreign funds have been net sellers in the Indian equity markets in December after making net purchases of $222.1 million in November. It is expected that there would be more dollar demand from foreign funds over the next few days as they may be looking to repatriate some of their earnings to their head offices. The detailed report follows:

Friday, 15th December, 2000

The rupee ended at 46.76/77 against its previous close of 46.765/77. The trades in the forex market were quite thin and the rupee remained in a tight range. The domestic currency opened the day unchanged from its previous close and traded in a narrow band. There were dollar remittances from exporters but this was absorbed by foreign funds and a south-based PSU firm which were buying dollars. It is expected that there would be more dollar demand from foreign funds over the next few days as they may be looking to repatriate some of their earnings to their head offices. The sentiment on the rupee is now positive with global oil prices softening and also on account of the euro strengthening against the dollar to a three-month high.   With economic growth in the US having slowed, the dollar has also begun slipping against the euro. Markets expect the euro to further gain against the dollar over the next couple of months.

Thursday, 14th December, 2000

The rupee ended little changed at 46.765/77 against its previous close of 46.76/765. The market saw thin trades during the day with negligible dollar flows from corporates. The rupee opened at 46.76/765 and was quoted at 46.76/77 in early trades. There was one large state-run market that was buying small lots of dollars in the market today. Though there was little action in the spot market, there was a good deal of activity in the forwards market. Forwards fell today with sentiment on the rupee improving. Global oil prices fell by $2 a barrel to $25 after Iraq resumed its exports of crude oil. The demand for heating oil because of winter season is quite high now. If the current trend in oil prices continues to hold, it is expected to see a further fall in oil prices by March next year. Forward premiums fell sharply on Thursday on the back of receiving (buy-sell swaps) interest by many banks. Stable conditions in the money market also contributed to the fall in premiums.

Wednesday, 13th December, 2000

The rupee ended at 46.76/765, little changed from its previous close of 46.765/77. The rupee traded in a range and there were moderate dollar sales by exporters and foreign funds. The rupee opened at 46.76/77 and was quoted at the same level in early trades. Air-India sold some dollars during the day, while a public sector oil firm bought dollars. Dollar sales by foreign funds during the day were mopped up by state-run banks, which were expected to be buying on behalf of the Reserve Bank of India. Foreign funds have been net sellers in the Indian equity markets in December after making net purchases of $222.1 million in November. They were net sellers during the months of September and October. In the forwards segment, premiums ended slightly lower, tracking a fall in call money rates. There was also some receiving (buy-sell swaps) by a large state-run bank which helped bring down forward premiums. 

Tuesday, 12th December, 2000

The rupee ended marginally lower after a state-run oil refiner bought dollars towards close of trade. The rupee ended slightly lower at 46.765/77 against its previous close of 46.7575/7625. The trade was dull other than the late demand from the oil firm and stray corporate flows. State-run banks, often seen acting on behalf of the central bank, were not very active and bought small amounts of dollars when it dipped to lower levels around 46.76. There was activity in the cash segment in the swap market after several weeks of steady levels and low turnover. The cash-over-spot (Tuesday to Thursday) premium on the dollar went up to 0.60 paise from normal levels around 0.40 paise on paying (sell-buy swaps) by banks after call money rates inched higher. Call money ended at 8.20-8.40 per cent compared with Monday's 8-8.20 per cent, as banks borrowed to fund subscriptions to Tuesday's auction of a 10-year government bond.  Forward premiums also edged higher in the shorter maturities, tracking higher call money rates.

Monday, 11th December, 2000

The rupee ended barely changed in extremely thin and listless trade. Opening around Rs.46.75/76 per dollar, the rupee was wedged in a tight two paise band of Rs.46.75 and Rs.46.77 and later closed at Rs.46.7550 / 7600, little changed from weekend closing levels of Rs.46.7550 / 7650. Rupee-dollar outright spot dealings remained quiet and range-bound in the absence of market-moving factors. Stray dollar demand was absorbed by the adequate local supplies. Favorable rupee sentiment on the back of new high of $39.021 billion and the downward trend in global crude oil prices has kept the forex spot trade stagnant, and the rupee stable and relatively firmly entrenched.  The benchmark Brent crude oil price was ruling below $30 a barrel for the second week running at $27.10.   Demand and supply of dollars have been good and evenly matched.

K.Venu Babu