Rupee slips to new closing low on sustained USD demand The Rupee ended last Friday at a new closing low of 48.70/71. It opened Friday morning at 48.6950/71 and touched an intra-day high of 48.6450/6550 on dollar sales by foreign banks & funds. However, the rupee slipped thereafter on renewed dollar buying by state-owned banks probably at the behest of the central bank. The persistent dollar buying by state owned banks is explained by RBI Governor’s comments at a seminar last week that the central bank has been buying dollars in a big way to boost the country’s forex reserves to meet all external obligations for 12-18 months. The call rate ended at 6.50%-6.70% on Saturday vs. Friday’s 7.25%-7.5%. The BSE Sensex rose 57 points to 3494 on Friday. Inflation touched a fresh low of 1.26% for the week ended 26th January while forex reserves rose by US$313 mln to US$ 49.565 bln for the week ended 1st February. Euro takes a brief reprieve as Wall Street worries continue to weigh on the Dollar. The Dollar was subdued in Friday’s trading as the European single currency stole the show by showing across the board strength. EUR/JPY was the major mover in the market, which rose to a high of Y117.60 from a low of Y115.60, as markets remain disappointed with BOJ’s way of handling policy decisions to revive the Japanese economy. Euro was underpinned by a striking rise in German industrial production to 1.9% m/m from previous –0.8%. In the US, wholesale inventories eased in Dec & sales showed a modest 0.4% m/m growth, only to indicate that manufacturers have been liquidating inventories in the wake of improving off take. The Dollar has been under mild pressure due to the Wall Street slide on concerns over US accounting practices after the Enron debacle. The Wall Street worries have impelled traders to shrug off positive growth & productivity data from the US. However, this could just be a passing storm & the Dollar might regain its strength if leads from the G7 meeting are anything to go by. The official statement from the two-day G7 meeting read that the prospects have generally strengthened for resumed expansion in economies although risks remain.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 48.6950 48.9005 49.3612 50.0167 51.2279 Bank Buys at 48.6850 48.8805 49.3423 49.9967 51.2079

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 1.84 1.90 2.02 2.42 Forward Premium 4.94 5.44 5.41 5.19 Implied Deposit 6.78 7.34 7.43 7.61 Sovereign Zero Coupon 6.51 6.53 6.54 6.56 Arbitrage -0.27 -0.81 -0.89 -1.05

Source: Mecklai Financial Services

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