Forward zooms

MUMBAI, January 9: The six-month annualised forward premium on dollar zoomed to 15 per cent prompting the Reserve Bank of India8217;s aggressive intervention at the interbank foreign exchange market here on Friday. The RBI conducted swaps to the tune of 200 million bringing the six-month forward premia down to 10.95 per cent 8211; well below yesterday8217;s close of 12.25 per cent.

In a thin market, the spot rupee however remained range bound. After opening at Rs 39.68/72 the rupee weakened to Rs 39.74/76 during the day. The combination of Southeast Asian currency crisis, Moody8217;s review of India8217;s rating for a possible downgrade and the Reserve Bank8217;s stricture to banks to maintain overnight limits triggered the spurt in forward rates.

The forward market behaved crazily today and if the Reserve Bank had not intervened to conduct swaps the six-month premia would have touched 18-20 per cent, a dealer in an European bank said. The rush by corporates to cover their near-term positions was so high that the one-month forward premia soared to touch 20 per cent before closing at 17 per cent.

Cash tom and cash spot also remained high and cash tom touched a high of 6.5 paise while cash spot went even further high to 8.5 paise. quot;The RBI measure forcing banks to bring their nostro accounts into the 15 per cent investment ceiling is driving the cash spot and cash tom to such high level.