| Indian rupee hits 3-week low against dollar |
MUMBAI The rupee weakened for a third consecutive session on Wednesday to end below 56 to the dollar for the first time in June, as dollar demand from oil firms weighed, setting up the prospect of RBI intervention.
The rupee is approaching a record low of 56.52 hit on May 31 after the Reserve Bank of India kept interest rates on hold on Monday, raising worries about economic growth prospects, and after Fitch Ratings followed Standard and Poor’s in cutting the country’s outlook to “negative.”
The rupee weakened even on a firmer day for the euro and other risk assets, which benefitted from hopes the US Federal Reserve will adopt further monetary stimulus measures. The outcome of that meeting will be crucial for the near-term outlook of the rupee, with any disappointment setting up the prospect of a hit to emerging risk assets.
“If the euro comes down tonight, Indian rupee may weaken further. I expect a 55.85 to 56.25 range on the rupee, but we will have to see whether the RBI steps in,” said A. Ajith Kumar, a foreign exchange dealer with Federal Bank.
The partially convertible rupee closed at 56.15/16 per dollar as per the SBI closing rate, versus its previous close of 55.95/96. It dropped to as low as 56.17 in the session, its lowest since June 1.
Forex dealers said some weakness in dollar overseas, renewed capital inflows and positive closing of local stocks capped the negative sentiment against the rupee.
“Though rupee was range bound through out the day, it depreciated during the end due to sudden demand of dollars,” said Hemal Doshi, Currency Strategist, Geojit Comtrade.
Moses Harding, Head - ALCO and Economic and Market Research, IndusInd Bank said, “Also, as the Fed is less likely to come up with a pleasant surprise (like QE3), Indian operators are cautious in taking position.” The euro rose marginally to $1.27, after adding gains of nearly 1 per cent in Tuesday and within striking distance of a one-month high of $1.2748 hit earlier this week.
Falls were sparked largely by dollar purchases from oil firms, the largest buyers of greenbacks, in the domestic currency market.
The BSE Sensex rose 0.22 per cent to 16,896.63 points.
Traders said they did not spot any intervention in the forex market during the session but expect the RBI will monitor movements and prevent the rupee from sliding towards recent record lows. The one-month offshore non-deliverable forward contracts closed at 56.56 while the three-month closed at 57.33.
Reuters
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