Rupee range bound ahead of monetary policy The Rupee gained in early trade on Wednesday on heavy dollar sales by foreign funds, exporters and unwinding of long dollar position by banks. After closing at 46.83 / 84 on Tuesday, rupee opened lower at 46.87 / 89. It traded in a narrow range with the sentiment boosted by comments from Central Bank officials that market had over estimated the currency's appreciation. The RBI's monetary policy due Thursday also kept traders wary of fresh positions and kept movements ranged. Expectations of restoration of bank refinance limits for export credit and cut in interest rates on export finance in Thursday's monetary policy, caused the forward premiums to end lower at 4.69% against Tuesday's close of 4.77%. Fed eased and Wall Street pleased! In an unexpected move the US Federal Reserve cut interest rates by 50 bps yesterday. The key Fed Funds rate was lowered to a six year low of 4.5% and the discount rate to 4%. The markets were taken by surprise as the Fed had been expected to cut rates at its scheduled FOMC meeting on May 15.The Fed has now cut interest rates by 200 basis points this year and further cuts can be expected at the next meeting. US stocks soared with the Dow up 3.9% and the Nasdaq up 8.1%. However, the currency markets were very volatile with the Euro touching a four and a half month low of 0.8694 and then rallying back to close at 0.8854 and the cable hitting a 15 day low of 1.4182 before ending the day at 1.4268. USD/JPY slipped to a 20 day low of 122.03 with the yen receiving support from comments by Japanese officials that they were not looking to weaken the yen.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 46.8550 47.0285 47.4160 48.0200 49.3037 Bank Buys at 46.8450 47.0048 47.3860 48.0050 49.2737

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 5.05 4.83 4.74 4.80 Forward Premium 4.27 4.70 4.96 5.21 Implied Deposit 9.32 9.53 9.70 10.00 Sovereign Zero Coupon 9.36 9.29 9.22 9.19 Arbitrage 0.04 -0.24 -0.48 -0.81

Source: Mecklai Financial Services

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