Rupee holds on to its strength amidst abundant dollar supply Rupee opened at 46.975/985 on Friday and quickly climbed up to 46.94/96 level on steady inflow of dollars. It was reported that Indian corporates continued to bring in their ADR proceeds for the second day consecutively. In the absence of any real demand for dollars from importers, large PSU banks were seen mopping up excess dollars to check excessive rupee rise. The Rupee eventually closed at 46.96/9650. Call rates were at 7.00/7.25% amidst easy liquidity. Forward premia initially slipped in tandem with easy call rates but recovered later on paying interest. Benchmark 6-month premium fell initially to 4.95% but closed the day at 5.01% level with previous close. BSE Sensex closed at 3660 losing 23 points on profit taking. Dollar off its highs vs. European counterparts; the under current still strong Euro received support from speculation of a possible intervention by ECB and bounced back from its year’s low of 0.85 and closed a tad below 0.86 against the Dollar. Fear of rising inflation in the Eurozone and no hopes of an immediate rate cut limited Euro’s further gains. Sterling rallied on stronger than expected UK Q1 GDP which rose to 2.6%(y/y) as against an earlier estimate of 2.5%. Dollar gained some ground against Yen at the back of Euro/Yen rally on intervention fears. Dollar was unaffected by U.S Q1 GDP which was revised down to 1.3% from 2% reported earlier and U.S durable goods order fell 5% in April. However, the blue chip Dow Jones index fell 117 points on weak U.S data.

Interbank Indian Rupee Markets Rupees per dollars Spot 1 Month 3 months 6 months 12 months Bank Sells at 46.9550 47.1426 47.5356 48.1750 49.3100 Bank Buys at 46.9470 47.1155 47.5076 48.1470 49.2820

FxForwards Percentages   1 Month 3 Months 6 Months 12 Months USD Libor 4.06 4.03 4.01 4.25 Forward Premium 4.55 4.86 5.15 4.99 Implied Deposit 8.61 8.89 9.17 9.25 Sovereign Zero Coupon 9.11 8.94 8.91 8.90 Arbitrage 0.50 0.04 -0.26 -0.35

Source: Mecklai Financial Services

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