Rupee falls further,hits 47.33 in intra-day trade

After plugning berlow the 47 level,the rupee closed at 46.95/96 per dollar on Friday,0.3 per cent weaker than its previous close of 46.81/82....

After plugning berlow the 47 level,the rupee closed at 46.95/96 per dollar on Friday,0.3 per cent weaker than its previous close of 46.81/82. In early trade,the unit fell to 47.33,its lowest since November 3,2009,at which point it was down 1.1 per cent. With this,the Indian currency posted its biggest weekly decline in nearly 14 years after swaying within a large band on Friday as domestic shares extended losses with concerns remaining over the euro zone8217;s growth prospects.

On the other hand,Indias foreign exchange reserves nosedived by a whopping US 3 billion for the second consecutive week due to the depreciation of major global currencies and capital outflows. The reserves declined by 2.938 billion to US 273.300 billion for the week ended May 14,compared to 276.238 billion in the previous week,RBI data showed. FII outflows and the depreciation of major currencies in the basket have contributed to the fall in reserves, a senior dealer with a state-owned bank said.

The rupee dropped 3.8 per cent during the week,its biggest fall since a 11.7 per cent decline in mid-July 1996. The market was very very volatile,47.33 levels could not be sustained as there were several corporates who came in to sell around those levels. Despite the recent euro gains,the rupee has not gained much. So for the near-term looks like 46.75 to 47.25 range will hold. Only if the Dow closes in the positive zone today,will we see some rupee strength next week, said a dealer.

So far this month,foreigners have pulled out 1.45 billion from domestic shares,bringing down net inflows in 2010 to 5.1 billion. The rupee has lost 5.5 per cent so far in May due to the outflows,and is down 0.9 per cent in the year to date. Last year,record portfolio inflows of 17.5 billion had helped the rupee gain 4.7 per cent. 8220;The central bank has stayed out of the markets so far,but if there is a lot of volatility of any particular day,they may step in to limit the volatility, said a dealer. The central bank has said it intervenes in the foreign exchange market to prevent excessive volatility but does not target any particular level for the currency.

Reserve Bank of India deputy governor KC Chakrabarty said on Friday the dollars rise against major currencies would impact the rupee too and the central bank cannot stop the local currency8217;s slide. Dealers said the rupee declined largely due to non-deliverable forward related buying.Indian one-year onshore dollar premiums too sank to its lowest level in 15 months as the spot rupee fell. One-year onshore premium fell to as low as 78.25 points,its lowest since Feb. 24,2009,and below its previous close of 84.25 points.

Meanwhile,after plunging to their three-month lows in early trade,Indian stocks regained three-fourth of losses but still ended lower. Tracking the sharp fall in the US markets overnight and resultant poor show by some Asian bourses,the Bombay Stock Exchange Sensex managed to settle the day lower by only 74 points at 16,445.61. The wide-based 50-share Nifty index of the National Stock Exchange settled at 4,931.15 points,down 0.33 per cent. The Sensex initially nosedived by 332 points to 16,187.03 mark a level last seen on February 19.

Brokers said foreign investors,spooked by losses in the US due to rising job claims,heavily offloaded shares and shifted investments to safer bets like gold. The recovery in the market was mainly driven by ITC figures ITC posted 27 per cent jump in Q4 profit and purchasing of shares at existing lower level. The market is likely to remain volatile, said a dealer.