Senior dealers say that export-dollar cancellation is also rearing its head in a market with heavy oversold positions.
The Reserve Bank of Indias (RBI) move on Monday to cap the interest offered on non-resident (external) rupee deposit saw the one-year forward cover dip to 0.96 per cent the following day from 1.28 per cent. But that was quickly corrected on Wednesday with the quote moving up to 1.19 per cent.
Far forwards moved up by seven paise today. The spot-rupee has lost ground by 15 paise this week. There are rumblings below the surface and it is better not to sit on open-positions. It is now dawning on some players that if the market is to be short of dollars in October, the spot-rupee could come under pressure, says Govindram & Cos partner, Rajesh Duseja, whose firm is a leading brokerage in forwards.
Said Standard Chartered Banks head-forex trading, Ranjul Goswami: Speculative longs are back. The volumes are small though. Some big corporates have started doing it.
Pointed out Bank of Americas senior strategist (currency & rates), MR Madhavan: The rupee has gained by over six per cent from May 2002 when it was at 49.07 levels. This is not sustainable. Short-positions are being covered now. There are huge unhedged positions as well. The rupee is overvalued by one per cent as of now.
While Mr Madhavan added that the rupee will be at 45.75 levels in mid-October and the larger correction has not started yet which will see the rupee quote at 47-levels a year down the line, most dealers say that the 46-mark will be a barrier, and after that, a slide to 46.25 levels is imminent. The market is particularly worried over the oversold point which has the potential to lead to a scramble for dollars. In that case, the RBI is expected to step in.
The inter-bank market is getting set for a bout of uncertainty with the redemption of the $5.5 billion Resurgent India Bonds (RIB). Dealers say that the period between October 1-15 will be a critical one.
Most though see it as a short-term issue, and there is nothing to suggest that the rupees good days are over.
Provisional data released by the Department of Commerce and Industry at the start of the month noted that the trade deficit for April-July 2003-2004 is estimated at $4.93 billion is higher than the deficit at $2.24 billion April-July 2002-2003.
Exports during April-July 2003-2004 are valued at $17.78 billion, which is 9.29 per cent higher than the level of $16.27 billion during April-July 2002-2003.
Exports during July 2003 are valued at $4.68 billion, which is 5.75 per cent higher than the level of $4.43 billion during July 2002.
Imports during April-July, 2003-2004 are valued at $22.71 billion representing an increase of 22.73 per cent over the level of imports valued at $18.51 billion in April-July 2002-2003. Imports during July 2003 are valued at $5.70 billion representing an increase of 17 per cent over the level of imports valued at $4.87 billion in July 2002.