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Rupee weakens to 55.8 vs US dollar as rate cut hopes dwindle

The rupee weakened by 12 paise to end at 55.80 against the American currency on fresh dollar demand from banks and importers amid a rise in May inflation sapping investors' hopes of a rate cut by the Reserve Bank next week.

Written by Agencies | Published: June 14, 2012 7:18:53 pm

The rupee weakened by 12 paise to end at 55.80 against the American currency on fresh dollar demand from banks and importers amid a rise in May inflation sapping investors’ hopes of a rate cut by the Reserve Bank next week.

The rupee resumed lower at 55.75 per dollar as against yesterday’s closing level of 55.68 at the Interbank Foreign Exchange (Forex) market.

With inflation data for May coming at 7.5 per cent,the rupee in line with the stock market lost further ground to touch 55.89,before finishing a tad higher at 55.80. This was a drop of 12 paise or 0.22 per cent.

Fresh dollar demand from banks and importers in view of uncertainty mainly affected the sentiment,forex dealers said.

Unlike yesterday when Euro supported rupee to snap a three-day losing streak,today 17-nation currency moved in a range against the dollar in Asian afternoon trading today at Hong Kong as trade was cautious ahead of Italian debt auction and Swiss National Bank’s policy meeting later in the day.

The rupee briefly attempted to stage a recovery by hitting 55.60 per dollar intra-day but the momentum failed to sustain.

“Inflation data had a negative impact on domestic currency today. Also,fall of Sensex by around 200 points also weakened the rupee,” said N S Venkatesh,Head of Treasury,IDBI Bank.

The rupee is likely to be range-bound in the next few sessions before Greece polls and RBI policy announcements,said Hemal Doshi,Currency Strategist,Geojit Comtrade.

The BSE Sensex dropped by 203 points or 1.20 per cent on heavy selling pressure in view of rise in inflation data and weak global stock markets.

According to Pramit Brahmbhatt,CEO,Alpari Financial Services (India),the rupee weakened after a higher-than-expected WPI numbers raised fears of a slow down in the aggression of RBI for a rate cut.

“A 25 bps repo cut and 50bps CRR cut has already been priced in and cut over and above this shall be positive for the rupee,” Brahmbhatt added.

Others feel the Greece re-election before the RBI Monetary Policy review will really be the deciding factor now.

“Any major happening can change the course of the RBI’s move. Overall rupee will maintain weakness during this week touching 56 levels soon,” said Abhishek Goenka,Founder & CEO,India Forex Advisors.

The premium for the forward dollar moved down on fresh receivings by exporters.

The benchmark six-month forward dollar premium payable in November down at 143-145 paise from 145-147 paise and the far-forward contracts maturing in May also ended slightly lower at 269-271 paise from 270-272 paise.

The RBI fixed the reference rate for the US dollar at 55.7940 and for euro at 70.0703.

The rupee inched up against the pound sterling to end at 86.66 from 86.67,while reacted downwards against the Japanese yen to settle at 70.37 per 100 yen from 69.90 yesterday.

It also fell back to 70.17 per euro from last close of 69.77.

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