The rupee has been getting a premium against the dollar in the non-deliverable forwards market since the past one week -- an unprecedented occurrence.

"This has never happened before. Traditionally, at the offshore NDF market the dollar claims a higher premium compared with the onshore market. The situation is reversed now," says a forex dealer.

This has given banks an opportunity to arbitrage between the offshore and onshore markets.

With forwards trading at a discount, importers are refusing to take cover as the feel that rupee can only appreciate against the dollar.

The exporters, on the other hand, are rushing to sell as they too feel that the greenback may depreciate further against the rupee.

The premiums on forward dollars dropped sharply as banks rushed to do buy-sell swaps fearing the Reserve Bank of India's purchases in the spot market would trigger a cash dollar shortage.

Meanwhile, premiums on the forward dollar up to six months continued to trade at a discount to the spot rupee on Monday.

This is because of the bullish outlook on the local currency, the arbitrage opportunities between non-deliverable forwards and domestic forwards, and the RBI's intervention in the spot market.

The rupee ended slightly weaker at 45.41/42 per dollar as against the previous close of 45.3850/3950.

The benchmark six-month annualised forward premium closed at a discount of 0.04 per cent compared with last Friday's discount of 0.02 per cent.

Forwards from the seventh month onwards are trading at a marginal premium over the spot rupee.

The seven months forward ended at premium of 0.03 per cent as against last Friday's discount of 0.13 per cent. The 12 months forward ended a tad up at 0.21 per cent as compared to its last close of 0.15 per cent.

Due to the strong outlook on the rupee, exporters will do well to book their future receivables whilst importers could start covering as forwards up to seven months are going at a discount, said a dealer with a private sector bank.

In the spot market, the rupee edged up on the back of dollar demand from corporates and Haj pilgrims. Intra-day, the Indian unit touched a high of 45.33 and a low of 45.44.

Dealers said the forward dollars may continue to trade at a discount unless the RBI intervenes through dollar supply.

"There is a shortage of dollars as RBI has been buying spot dollars from the market," said Development Credit Bank, chief dealer Paresh Nayar.

With forward premiums trading at a discount the arbitrage opportunity has increased as the overseas investors are not hedging their exposure and thereby brining down the investment cost.

Dealers said that corporates are now preferring to cover the longer end of the market.

Petro-chemical companies and some of the software companies are looking at covering longer tenures even up to 10 years, dealers said.