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Rupee ends below 57-mark after one year, slides 22 paise

In three straight days, the local currency has tumbled by 62 paise or 1.1 percent. On a weekly basis, the rupee fell for the fifth consecutive week as it lost nearly 1 percent.

Mumbai: The rupee on Friday closed below the key 57-mark against US dollar for the first time in a year sliding by 22 paise to 57.06, casting a shadow on the economy as imports become costlier, Current Account Deficit woes worsen and inflation risks rise.

At the Interbank Foreign Exchange (Forex) market, rupee resumed higher at 56.70 on initial rise in local stocks. It, however, later turned negative on heavy dollar demand from importers, mainly oil refiners, to touch a low of 57.12. Rupee finally ended at 57.06, a fall of 22 paise or 0.39 per cent.

A weak rupee makes imports costlier, including oil and other commodities. It also affects dollar-denominated liabilities of corporates. However, export-oriented sectors like IT are expected to benefit from a weak rupee.

In three straight days, the local currency has tumbled by 62 paise or 1.1 percent. On a weekly basis, the rupee fell for the fifth consecutive week as it lost nearly 1 percent.

“Rupee had shown weakness in the recent trading sessions due to external factors like apprehension about tapering of QE by US Fed along with strengthening of dollar. Also, concerns regarding high CAD level had also pulled down the domestic currency. Rupee will remain under pressure in the near-term,” IDBI Bank Treasury Head N S Venkatesh said.

FIIs pumped Rs 158 crore in stocks but was of no help to rupee. Concerns about India’s CAD had depreciated rupee by nearly 5 per cent in May 2013 despite of huge foreign inflows.

Amid rupee crossing 57 mark, RBI Governor D Subbarao said: “RBI does not target any exchange rate. We intervene in foreign exchange market only to manage the volatility and to manage disruption to the macro economic situation.”

Analysts expect the rupee to revisit its all-time low of 57.32 hit June-end last year as early as next week.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: “The trading range for the spot USD/INR pair is expected to be within 56.80 to 57.30.”

Meanwhile, dollar index was trading down by 0.30 percent against a basket of six major currencies ahead of US monthly jobs data.

Hemal Doshi, Currency Strategist, Geojit Comtrade said: “Rupee was possibly weakening due to statements from policy makers regarding high CAD and the current BoP situation. Otherwise, global market was quite stable.”

Unless rupee pulled back to 56.70 level, it would remain under pressure, he added.

Deutsche Bank said the fall in rupee is temporary and it was not worried about outlook of the Indian unit, which is likely to bounce back in second half of 2013.

On Thursday, Finance Minister P Chidambaram tried to soothe the frayed market after rupee hit a new 11-month low.

“There is no cause for alarm over the rupee fall, as capital inflows are strong, especially in April and May. I am sure the rupee will find its right value soon,” he had said.

The rising CAD, which is expected to rise to a record high of 5 percent of GDP in FY13, is being seen as one of the factors affecting the rupee, while some analysts also point to overall appreciation in the dollar against globally.

On the widening Current Account Deficit, Dr Subbarao on Friday said there are three concerns about India’s CAD. These are quantum of CAD, quality of CAD and financing the CAD.

The increase in the deficit above the sustainable levels year-on-year is certainly going to add the pressure, he said.

Meanwhile, premium for forward dollar remained weak on sustained receipts by exporters.

Benchmark six-month forward dollar premium payable in November moved down to 155-157 paise from Thursday’s close of 157-158-1/2 paise. Far-forward contracts maturing in May also declined to 309-311 paise from 312-314 paise.

The RBI fixed the reference rate for the US dollar at 56.7445 and for the euro at 75.2033.

The rupee tumbled further against pound sterling to 88.90 from previous close of 87.77 and also plunged against the euro to end at 75.66 from 74.54. It also collapsed against the Japanese yen to 59.67 per 100 yen from 57.39.


From Zee News

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