By Nimesh Vora
MUMBAI, Dec 7 (Reuters) – The Indian rupee forward premiums will rise from their current decade-low levels as dollar flows resume, Reserve Bank of India Deputy Governor Michael Patra said on Wednesday.
The 1-year USD/INR implied yield dropped to 1.62% on Tuesday, its lowest level since 2010.
The 1-month yield had declined to nearly 1.50%.
“What it (low premiums) is telling us is that there is cash (dollar) shortage, but that is now getting alleviated,” Patra said when asked by Reuters about the impact of the fall in premiums on the spot market.
“If you see forward premiums have started to correct today. So flows are coming back,” Patra said at a press conference after the RBI raised its key repo rate.
On Wednesday, the 1-year yield was up 10 basis points from Tuesday’s lows.
“There was a downward dip in the exchange rate (USD/INR) to which people responded by holding back proceeds coming in … I think it was around the monetary policy,” Patra said.
Now that the announcement was made and the RBI Governor Shaktikanta Das has given specific assurances on the exchange rate and the external sector, forward premiums will rise, Patra said.
(Reporting by Nimesh Vora; Editing by Savio D’Souza)
