Indian onshore dollar premiums edge down across tenors as expectations of an improvement in banking system liquidity helps sentiment, while weakness in spot rupee prompts exporters to receive forwards.
"With the spot DLR/INR higher, premiums are lower. In general, this could well be the last week of money tightness. Next week's redemption (bond) will provide liquidity," says R. K. Gurumurthy, head of treasury at ING Vysya Bank.
One-year onshore dollar premiums trade at 153 pts from 156.25 pts at pvs close.
Spot rupee hits a 2-wk low of 47.10/USD.
"If liquidity moves positive, then even a 25 bps hike will not prevent the 1-year premium from moving to 130 pts," Gurumurthy says.
Traders are mostly bracing for another 25 bps hike in key rates, at the central bank's policy review on July 27.
