The rupee on Friday fell by a whopping 53 paise to close at nearly a two-month low of 54.89 due to heavy dollar demand from oil importers and may breach 56-level in the short term.
Mumbai: The rupee on Friday fell by a whopping 53 paise to close at nearly a two-month low of 54.89 due to heavy dollar demand from oil importers and may breach 56-level in the short term.
Forex dealers said euro falling to 1.3008 levels and the US dollar strengthening against major currencies overseas also put pressure on the local currency.
"The rupee fell sharply today as the market was disappointed with the Budget for not meeting its expectations to take concrete steps to curb the burgeoning current account deficit (CAD)," said Ashtosh Raina, chief dealer at HDFC Bank.
He added that rupee is likely to fall further to 56-level in the near term.
The rupee commenced lower at 54.65 per dollar from yesterday's close of 54.65 at the Interbank Foreign Exchange (Forex) market. It hovered in a range of 54.40-54.94, before ending the day at 54.89, a net fall of 53 paise, or 0.97 percent over its previous close.
Previously, it had finished at 54.98 on January 8, 2013.
However, the BSE benchmark index Sensex, which had fallen to a three-month low yesterday, recovered some ground and gained 57 points to end at 18,918.52 today.
Foreign institutional investors pumped in USD 114.21 million (Rs 626.89 crore) into local equities, according to BSE provisional data.
In a research note, Managing Director and Chief India Economist Tushar Poddar said: "With risks to the net borrowing requirement from the budget to the upside, and no major proposals in the budget to reduce the current account deficit (CAD), we think there are depreciation pressures for the INR in the near-term."
Rupee has a risk of further depreciation beyond 55 in the near-term, he added.
IDBI Bank Treasury Head N S Venkatesh said dollar demand from oil importers payments and selling pressure due to weakening in euro also weighed on rupee.
He, however, added that the fall in rupee is a short-term phenomenon and it will improve to 54.30-54.60 soon.
Fresh sell-off by foreign funds yesterday over the announcement of Tax Residency Certificate (TRC) by Finance Minister P Chidambaram in his Budget speech yesterday which created fears in the foreign investors mind, also weighed on the rupee, dealers said.
"The rupee ... Continued to take cues from the disappointing Budget. International factors like weak euro and strong dollar index also pointed towards the rupee fall...," said Abhishek Goenka, founder and CEO, India Forex Advisors.
The premium for the forward dollar finished stable.
The benchmark six-month forward dollar premium payable in July closed at its overnight level of 164-166 paise and far-forward contracts maturing in January too settled stable at 332-334 paise.
The RBI fixed the reference rate for the US dollar at 54.4815 and for euro at 71.2736.
The rupee recovered slightly against the pound sterling to 82.50 from yesterday's close of 52.50.
It dropped further against the euro to 71.55 from last close of 71.29 and also remained weak against the Japanese yen to end at 59.09 per 100 yen from 59.00.