Rupee Locked In A Narrow But Lower Range Rupee ended weaker at 48.3550/3650 but off its intraday low of 48.3650/3700. The mopping up of Dollars by a British bank was almost over in the morning session but the rupee remained weak with the state-owned banks absorbing all the dollar supplies from exporters who were also taking the advantage of a weaker rupee.With the European majors also depreciating against the dollar, the downward pressure on the rupee may persist . The forward premiums remained on the softer side with the 6-month premium closing at 5.85% compared to Thursday's close of 5.92%. The BSE stock index shed 25 points closing at 3332. India's forex reserves surged up to $ 49.225 bn while inflation touched a two-decade low of 1.5%. Energised Dollar nudges its counterparts to relent. The Dollar struck at its counterparts like a torpedo after Fed Chairman Greenspan said that the forces restraining the economy are diminishing & activity is beginning to firm. Dollar bulls took the statement as an indication of a turnaround in business cycles & faster recovery in the US, killing hopes of another rate cut at the FOMC meet this week. Taking leads from the above statements, the Euro nose-dived to $0.8634 triggering stop loss orders & breaking supports, as markets remained wary about Eurozone’s prospects, with Italian inflation increasing by 0.5%m/m in Jan. Compounding the complexity of Eurozone is Germany, where inflation is perceived to increase due to an up-tick in prices after Euro’s launch, which makes it difficult for ECB to cut interest rates & also concerns grow as budget deficit nears 3% of GDP with worsening employment conditions. The Pound mirrored the Euro and slumped to a low of $1.4069 before stabilizing around $1.41. A fall in UK Q4 GDP growth to 0.2%q/q from previous 0.5% also weighed on the pound. The Yen sails in rough sea, as foreigners reportedly sold JGBs, with Japanese officials turning a blind eye on Yen’s weakness & also speculations of a downgrade of Japan’s sovereign debt rating.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 48.3500 48.5700 49.0850 49.7627 51.0435 Bank Buys at 48.3425 48.5525 49.0625 49.7401 51.0210

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 1.83 1.87 2.02 2.50 Forward Premium 5.34 6.02 5.81 5.56 Implied Deposit 7.16 7.89 7.83 8.06 Sovereign Zero Coupon 6.87 6.87 6.88 6.89 Arbitrage -0.29 -1.02 -0.95 -1.16

Source: Mecklai Financial Services

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