Spot comatose; Forwards soften A holiday in the United States meant that cash demand for dollars was pretty light and spot traded in a narrow range. After opening at 48.23/24 spot meandered in the 48.23/2450 range before closing weaker at 48.26/2650 as banks closed their short dollar positions. Gov Jalan made the Fin Ministry happy saying that an overshoot on government borrowing plans would not lead to pressure on interest rates and that he was comfortable with the current conditions in the forex market. It’s probably a reflection of the dire state of Indian industry that even an increase in govt. borrowing is not pushing the interest rates higher. Forward premia fell on the news that EPF rates might be cut again. The benchmark 6-month premium closed lower at 5.98% compared to the previous close of 6.02%. BSE Sensex was up 5 points at 3,382. Yen slips on O’Neill comments, Euro flat against Dollar Yen slipped lower against the Dollar after the Japanese Finance Minister said that U.S Treasury Secretary during a meeting with him this morning mentioned that ‘ foreign exchange rates should be up to the market’. O’Neill is in Tokyo to attend a conference on Afghanistan. Yen is currently trading about 133.57 after falling to 133.63 from 132.64 seen yesterday. Against the Euro, Yen fell to 117.98 from 117.26 earlier. Amid thin trading due to U.S holiday yesterday, Euro held steady against the Dollar in the New York session and is currently trading about $0.8830 from $0.8843 in Europe earlier. Euro remained immune to the weaker than expected November Eurozone industrial output which fell 0.8% month-on-month and down 4.3% for the year. Cable is at $1.4315, lower from $1.4370 in New York on Friday. Markets will keenly look for hints on monetary policy from Greenspan during his testimony before the Senate Budget Committee on Thursday.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 48.2850 48.5193 49.0118 49.7220 51.0576 Bank Buys at 48.2750 48.4954 48.9868 49.6970 51.0237

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 1.76 1.80 1.92 2.32 Forward Premium 5.65 5.96 5.92 5.72 Implied Deposit 7.41 7.76 7.84 8.03 Sovereign Zero Coupon 7.03 7.03 7.03 7.03 Arbitrage -0.38 -0.73 -0.81 -1.00

Source: Mecklai Financial Services

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