Rupee rallies moderately in a thin trade Rupee closed firmer at 48.7050/71 last Friday from opening level of 48.7450/76 on continuous dollar supplies from foreign funds. Trading in the market was thin as most of the major state-run banks were not active because of the Maharashtra bandh called on by VHP. The forward premia rose across all tenors. The benchmark 6-month premium closed at 5.99% vs. 5.93% on Thursday. The call money remained high on Saturday on tighter liquidity and closed at 7.75%-8.25%. The BSE Sensex recovered most of its Budget day losses on hectic FII buying and closed 116 points up at 3678. Inflation rose to 1.39% for the week ended February 16 while forex reserves surged by US$ 237mln to US$ 50.45bln for the week ended February 22. World economy looks ahead – US determined to lead the race. The Dollar rises against majors on positive data, with ISM (formerly NAPM) manufacturing index surging to 54.7 in Feb (prev 49.9) rising above the key 50 level for the first time since July 2000. The index also showed improvement in new orders, bolstering production & reduction in inventories indicating liquidation of inventories, as personal consumption pepped up by 0.4% in Jan (Prev revised 0.3%). The Dollar shrugged off the negativity evidenced in the University of Michigan Sentiment survey index, which fell to 90.7 in Feb (Prev 93). The Euro fell to a low of 86.35 cents against the strong Dollar, as conflicting data from Euro zone set off each other. The Eurozone manufacturing PMI rose to 48.6 in Feb (prev 46.3), but retail sales slid to -0.6% m/m in Dec & French consumer confidence declined. Inflation pressures would still restrain ECB from cutting interest rates. The Pound also gave way to Dollar’s gains, despite the UK CIPS manufacturing index breaking the key 50 level to 50.1 (prev 46.5). Yen smiled despite positive US data, as repatriation pressures & a dip in unemployment, underpinned the Yen. Yen is also boosted by massive short covering in equities prompted by regulatory changes in short selling norms, which gave the Nikkei its much-needed strength.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 48.7100 48.9855 49.4850 50.1475 51.3248 Bank Buys at 48.7000 48.9655 49.4600 50.1275 51.2939

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 1.87 1.90 2.04 2.48 Forward Premium 6.66 6.30 5.88 5.35 Implied Deposit 8.53 8.20 7.92 7.83 Sovereign Zero Coupon 6.47 6.47 6.50 6.51 Arbitrage -2.06 -1.73 -1.43 -1.31

Source: Mecklai Financial Services

For archives of the above analysis, please click here.

A Forex service by eMecklai.com for NRIOL.com visitors. All rights reserved worldwide. Questions or comments on this service, please contact: forex@nriol.com