Will RBI cut CRR and Bank Rate? The Credit and monetary policy due to be announced today has the markets guessing whether the RBI will cut the Bank rate or the CRR or both. Most analysts feel that a 50 bps cut in the CRR is likely , while a cut in the bank rate may not be announced immediately . The RBI is also expected to forecast a growth rate of 6 % for the economy during the year , with inflation likely to remain around 4 % . The rupee ended firmer at 48.965/9750 on Friday compared to its previous close of 48.98 amid ample supplies after the holiday on Thursday and low importer demand . Forward premia ended lower on some late receiving by banks ahead of the credit policy announcement . The six month forward closed at 5.79 % compared to the previous close of 5.96 % . Call money rates ended unchanged at 6.5% with comfortable liquidity in the market. Dollar at new lows Even a 5.8 % rise in US Q1 GDP , against a market forecast of 5 % , failed to enthuse the markets and the dollar suffered further losses in New York on Friday , falling to a near four month lows against the euro and the pound . It also declined against the yen to 127.80 as the market focused on the growing realisation that the US recovery was not going to be as strong as expected. The euro broke above the crucial 90 cents level to touch a high of 0.9020 despite the poor French GDP figures. Cable too overcame the decline in the UK Q1 GDP to 1 % y/y against the previous 1.6 % and rose to a high of 1.4575 . The yen received support from a statement by former Japanese finance minister Shakakibara that a rate between 120 - 125 was acceptable. However , given the recent comments by Japanese officials a decline below the 125 level is likely to be met with intervention by the Bank of Japan.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 48.9800 49.2134 49.7057 50.4059 51.6187 Bank Buys at 48.9700 49.1982 49.6753 50.3762 51.5937

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 1.84 1.92 2.12 2.65 Forward Premium 5.66 5.84 5.78 5.37 Implied Deposit 7.50 7.77 7.91 8.03 Sovereign Zero Coupon 6.31 6.32 6.32 6.32 Arbitrage -1.19 -1.44 -1.59 -1.70

Source: Mecklai Financial Services

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