Range trade in Rupee The Rupee ended unchanged on Friday from its previous close of 48.90 after moving up during the day to a high of 48.88. The rupee gained in afternoon trade as banks reversed their long dollar positions on expectation of continued good supplies in the market and the absence of any significant demand. However, some late buying of dollars nudged the rupee down back to the 48.90 level. In the forward market, good paying interest for the far forwards pushed up the premia while the near term forwards ended unchanged after declining earlier. Call money rates ended sharply higher at 7% compared to the previous close of 6.4%, on some late demand for funds by banks to meet their reserve requirements. Dollar heading for trouble? At the G7 meeting over the weekend, finance ministers and central bank officials of the member countries concurred that a world economic recovery was underway . There was, however, concern over the growing current account deficit in the US and its fallout on the global economy. The deficit is expected to rise to 4 % of the GDP by the end of the year and to 5% next year . Investment flows have increased recently towards countries like Canada, Australia and New Zealand which have been tightening their interest rates , with investors wary of the US markets. The dollar ended lower against the euro and stronger against the yen in New York on Friday. The euro fell to a low of 0.8882 on news of the failure of the wage negotiations between the German employers and IG Metall union. EU's Rato said that euro zone economic fundamentals were stronger than the US but the EU must improve its growth potential. The yen gave back early gains to end at 130.37. Japan's Finance Minister Shiokawa told the G7 members that Japan would focus on speedier disposal of bad loans by banks and compile an economic reforms program by the end of June. Cable moved in line with the euro's moves against the dollar, ending the day at 1.4479.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 48.8950 49.1590 49.7014 50.4724 51.7290 Bank Buys at 48.8850 49.1390 49.6724 50.4463 51.6990

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 1.85 1.94 2.15 2.71 Forward Premium 6.36 6.52 6.42 5.78 Implied Deposit 8.21 8.46 8.57 8.48 Sovereign Zero Coupon 6.28 6.28 6.28 6.28 Arbitrage -1.93 -2.18 -2.29 -2.20

Source: Mecklai Financial Services

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