Rupee trades low ahead of Fed meet

MUMBAI: Ahead of the US Federal Reserve’s meeting to be held late on Tuesday evening, traders shied away from taking fresh positions, both on the bond and forex markets on Monday. Market participants are largely expecting that the Fed would announce another rate cut, which would cause the rupee to rise further against the dollar.

The forex market saw significant intervention from the Reserve Bank of India (RBI) at regular intervals, in a bid to prevent the rupee from breaching the 39.40 mark against the greenback. The rupee ended the day at 39.40/41 against the dollar, weakening from Friday’s close of 39.39/40. It had touched an intra-day high of 39.37 following which there was sustained buying of dollars by nationalised banks.

Forward premia slipped slightly, as rates on the one-month contract ended the day at 2.27% (2.40%). Rates on the six- month contract ended the day at 1.61%(1.59%), while the annual contract ended flat at 1.21%(1.21%).

Further, the end of this week would also see advance tax payments worth almost Rs 35,000-50,000 crore. A senior trader with a bond house said, “Call rates will once again start rising and the cash conditions could remain under strain till the first week of January, when the government would resume its spending.”