INSUBCONTINENT EXCLUSIVE:
Traders said the unexpected surge in forward premiums has made the spot market highly illiquidNear-term forward premiums in India surged on
Tuesday with the one-month dollar/rupee premium trading at its highest level in more than two decades as massive dollar inflows towards an
initial public offering skewed prices
The partially convertible rupee was trading largely steady at 73.91/92 per dollar at 0830 GMT compared to its close of 73.9150 on Monday
after earlier rising to 73.7725 levels
"As long as the carry is at such elevated levels, no one will go long dollar," the head of foreign exchange trading at a private bank said.A
The United States dollar extended gains, unwinding a month-long decline as investors weighed chances that interest rates will be forced
higher by a United States economic recovery and awaited upcoming data and policy speeches for clues.India's one-month forward premium was
quoted at 0.51 rupee after having touched 0.64 rupee earlier in the session, its highest since at least 2000
The 1-year forward premium touched 4.00 rupee, its highest since August 2016."It is mainly due to surplus dollars lying in the system,
accumulated mainly because of offshore unwinding and it has been further aggravated by Powergrid flows," a separate dealer with a private
bank said.PowerGrid InvIT's initial public offering closed for subscription on Monday and had attracted a total subscription of $2.78
Traders said the sudden unexpected surge in forward premiums has made the spot market highly illiquid and volumes are likely to stay subdued
until the forward premiums correct."Many banks are sitting on large losses due to such erratic moves in forwards
I feel RBI will have to come out with some solution to it," said Paresh Nayar, head of forex and fixed income trading at First Rand Bank.
