Rupee weakens by 48 paise vs US dollar to close at 54.97

Falling for the second straight day,the rupee today lost 48 paise to close at 54.97 against the US dollar on heightened demand of the US currency from importers despite robust fund flows into stocks.

Written by Agencies | Mumbai | Published: July 5, 2012 8:28:35 pm

Falling for the second straight day,the rupee today lost 48 paise to close at 54.97 against the US dollar on heightened demand of the US currency from importers despite robust fund flows into stocks.

Forex dealers said rupee was under pressure throughout the session as dollar gained against rivals on hopes that European Central Bank (ECB) will cut its main interest rate to a record low in a bid to support the region’s economic growth.

At the Interbank Foreign Exchange (Forex) market,the rupee opened sharply lower at 54.80 from the overnight close of 54.49.

It later dropped further to an intra-day low of 55.23 before recovering some lost ground to settle at 54.97,a fall of 0.88 per cent or 48 paise.

“There were no signs of RBI intervention. After rupee firmed in last 3-4 sessions,this kind of pullback happens,” said Hemal Doshi,Currency Strategist,Geojit Comtrade.

Market participants said the FII inflows of Rs 430 crore into stocks did not help rupee mark a turnaround today.

“Fall in rupee was due to oil importers’ demand along with weakening of Euro against dollar,” said N S Venkatesh,Head of Treasury,IDBI Bank.

Reflecting the US currency’s strength,the dollar index today was up by 0.22 per cent against a basket of currencies,ahead of the widely-expected rate cut by ECB and more stimulus measures from the Bank of England.

After the Indian forex market closed,ECB cut its main interest rate to 0.75 per cent and its deposit rate to zero.

Consequently,the Euro,which had steadied prior to the rate announcement,fell to the lowest levels of the day hitting USD 1.245,down 0.57 per cent.

Meanwhile,the Indian stock market benchmark Sensex today closed up by 75.86 points to 17,538.67,its 3-month high.

According to Pramit Brahmbhatt,CEO,Alpari Financial Services (India) said,” The rupee extended its weakness for second session tracking global currencies where the dollar index remained off beat on speculations concerned with the ECB and BoE policy actions.”

After the Indian markets closed,The Bank of England (BoE) announced restarting bond purchases while China lowered benchmark rates for the second time in a month.

Forex experts said the recent rupee’s strengthening was on the back of euphoria created by the FII debt auction and a correction could be in the offing.

“As the auction didn’t go up to the expectation of the market,we saw rupee weakening above 55 plus levels. If rupee is unable to hold below 55 levels for the next few days then we could see rupee testing its all time low levels of 57.33 against the dollar,” said Abhishek Goenka,Founder & CEO,India Forex Advisors.

The premium for the forward dollar remained weak on sustained receivings by exporters.

The benchmark six-month forward dollar premium payable in December declined further to 167-168 paise from previous close of 173-175 paise.

The premium for far-forward contracts maturing in June also dropped to 300-302 paise from 312-1/2-314-1/2 paise yesterday.

The RBI fixed the reference rate for the US dollar at 55.0250 and for euro at 68.9660.

The rupee reacted downwards against the pound sterling to 85.71 from yesterday’s close of 85.28 while the rupee moved down further to 68.76 per euro from 68.50 previously.

The rupee also dropped further against the Japanese yen to 68.99 per 100 yen from overnight close of 68.27.

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