As expected, the rupee staged a rally against the dollar on the first day of the week and gained a whopping 28 paise in a single day on Monday as a result of the measures announced by the RBI last Friday. But after that, the rupee again fell back. Although there was not much of a dollar demand from the importers towards the end of the week but the sentiment on rupee continued to be bearish because of the demand from the FIIs, who continued to be net sellers in the equity markets and repatriating funds to the US market, where the interest rates are ruling high without any forex risk. The exporters also came to the market only on Thursday and chose to wait to see whether there is any further pressure on the rupee. The detailed report follows:

Friday, 28th July

The rupee ended the day lower at 44.87/88 against the dollar, slightly lower from its previous close amid fewer trades in the forex market. It opened at 44.86.87 and traded at the same level in the early trades. The market was expecting that the exporters will come and sell their dollar receivables as the rupee seems to be settled down, but they chose to wait for some more time to see whether there is any further pressure on the rupee. There was not much of dollar demand from the importers for the last two days. There were no State run banks in the market on Friday to support the rupee and therefore the rupee fell later in the day. The market is expecting the banks to support rupee at a slightly lower level.

Thursday, 27th July

The rupee ended barely unchanged from its previous close at 44.855/865 due to decreased dollar demand from the importers but the sentiment on the rupee continued to be bearish. The rupee opened at 44.87/88 and traded in a very narrow range before closing at this level. The usual month-end dollar demand from the importers has waned but there was still some demand from some banks who were buying on behalf of the FIIs who continued to be sellers in the equity markets. With the rupee settled down and the harsh measures from the RBI to prevent any further fall in the rupee, some exporters came to the market to sell their dollar receivables. That helped the rupee to strengthen.

Wednesday, 26th July

The rupee firmed up on Wednesday by 5 paise to close around 44.85/86 due to large inward remittances of dollars by an IT company. The rupee at 44.90/92 and was quoting at 44.94/96 in early trades. There were expectations that there would be heavy dollar demand from the importers but that was not the case and that propped up the rupee. After touching an intra day low of 44.96/97, the rupee firmed up when there were inward dollar remittances from an IT firm. Some foreign and private banks also sold dollars. The inflows were to the tune of $100 million. However, towards the close of market, dollar demand from an oil PSU took away some of the rupee's gain. The sentiment on rupee is still bearish with FIIs selling heavily in the equities market and repatriating the money abroad.

Tuesday, 25th July

The rupee again fell against the dollar on Tuesday due to heavy dollar demand from corporates and closed at 44.90/91 down 16 paise from its previous close. The rupee opened at 44.77/80, touched an intra-day low of 44.96/97 and finally closed at these levels. There was usual month-end demand for dollar from the corporates and this might continue for the rest of the week. So there was still a chance of rupee crossing the 45 mark again during this week. Many banks were buying dollars on Tuesday and the demand seemed to be genuine. In the forwards market, the forward premia went up sharply in the early trades but came down later in the day. The six month annualized premia ended the day at 4.45% against its previous close of 4.71%.

Monday, 24th July

As expected, the rupee rallied against the greenback on Monday and closed 28 paise stronger against its Friday's close. The rupee opened at 44.70/75, traded in a broad range of 44.65/75 and finally closed at 44.74/75. There was demand for dollars from the importers even today, but the banks were there in the market supplying whatever dollar was demanded to support the rupee. Dollar demand was also there because the FIIs have been selling in the Indian equities markets and repatriating the dollars back to their home markets. FIIs are net sellers in the equity markets to the tune of $ 305 million in the month of July. Interest rates are already high in the US markets and they are further expected to go up. The Fed is going to decide the future interest rate levels soon. In such a scenario, many of the FIIs are preferring to invest in the US markets because of no currency risk.

Rajneesh Mittal