• PAGE ONE
• INDEX
• HOME

Re closes sharply firmer; call dips on easy liquidity

MUMBAI

THE rupee staged a sharp recovery on Tuesday, gaining around seven paise against the dollar. It closed at 46.7550/7650 in a subdued forex market, as against Monday's close at 46.82/83.

Dealers attributed the rupee recovery to several factors such as the dollar's downward trend, lack of buying interest due to the holiday season and good exporter supplies, with players unwinding their long positions.

``Next week, the euro may retreat after a 400-500 basis point rally, at which point we may see some profit-booking, and consequently the rupee may decline by another two to three paise,'' said a forex dealer.

The forwards crashed on Tuesday following the rupee recovery, with the six-month premium ending at 3.94 per cent (4.10 per cent) and the premium for 12 months ending at 4.21 per cent (4.30 per cent)

``The market is currently witnessing low demand for the dollar, with corporate interest low given the time of the year. Typically at such a time, the market tends to be one-sided depending on whether it is the importers or exporters covering their positi ons,'' said an analyst.

Analysts and forex dealers expect the rupee to be steady in the coming week as fears over the high global oil prices are stabilising. On the other hand, the RBI has made it clear that it will intervene to defend the rupee if necessary, as demonstrated wh en the rupee breached 46.90 levels recently.

``It looks like its going to be a relatively quiet fortnight for the rupee, with RBI reserves up and statements from the apex bank that it will take care of any temporary mismatches in demand and supply. But the rupee is inherently unpredictable and one cannot discount the possibility of an external trigger setting off the whole situation again,'' said a forex dealer.

Call money ended Tuesday easy, straddling the benchmark central bank repo rate, amid ample supply of funds and light demand, dealers said.

Call money rates ended at 7.95-8.05 per cent, a notch lower than Monday's close of 8.0-8.10.

Most deals were around eight per cent, with some stray trades at 7.95 per cent, dealers said.

Call money eased after opening around 8.05-8.10 per cent as liquidity remained easy while there was no pick-up in demand.

A large State-owned bank invested Rs 6,000 crore in the central bank's one-day repo at eight per cent.

Liquidity has received a boost with most of the collections raised through the State Bank of India's Millennium Deposit plan brought into the country.

Market sentiment is also positive as pressure on the rupee has eased in recent sessions on a fall in global oil prices and a firmer euro.

No deals were reported in the interest rates swap market. -- Our Bureau