Mumbai: Although the rupee bounced back with a vengeance on the last two days of the week from its an all-time low of 68.85 logged on Wednesday on steps taken by the apex bank to stem the rupee fall and late recovery in local equities, but the currency still closed down by 250 paise at 65.70 against the Greenback, extending losses for the third straight week.
Fag-end dollar selling by exporters and some state-run banks on behalf of the Reserve Bank of India (RBI) also helped the rupee in recovery.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 63.65 a dollar from last weekend's close of 63.20 and continued its downslide for the straight three days to touch a life-time low of 68.85 on Wednesday on continued capital outflows and initial dollar demand from importers, mainly oil refiners.
Later, it rebounded on last two days on RBI's steps to settle the week at 65.70, still showing a steep fall of 250 paise or 3.96 percent.
Global ratings agency Fitch Monday said India's fiscal numbers "look weak" and warned of a downgrade if the country is unable to meet the fiscal deficit target, also had a negative impact on the rupee.
Concerns among investors about the widening current account deficit have led to turmoil in the stock markets and a sharp depreciation of the rupee, a forex dealer said.
Worries about the passage of food subsidy bill in Lok Sabha and concerns over the rise in the global crude oil prices due to geo-political reasons were another negative reasons for the rupee.
The rupee too declined on speculations that overseas investors will pull out of India as the US economy recovers and the Federal Reserve eases its stimulus programme.
The rupee registered its biggest single-day loss of 256 paise on Wednesday when it had closed at historic low of 68.80 as global oil prices jumped, deepening concerns about the current account deficit and capital outflows.
"There is a shortage of dollars in the market as participants are expecting the rupee to fall to 70-72 level," said Naveen Raghuvanshi, associate vice-president of Development Credit Bank. "Even corporates are not willing to sell dollars at these levels. Whatever small supply of dollars is seen today, it is coming from the nationalised banks."
The dollar strengthened overseas on likely tapering of bond buying by the US Federal Reserve from next month, putting pressure on the rupee.
The battered rupee gained 225 paise on Thursday, the most in at least 15 years, after the Reserve Bank of India eased pressure in the currency market by starting a facility for state-run oil refiners to buy foreign exchange.
The RBI late Wednesday said PSU oil companies could buy dollars through a special swap window effective immediately. Indian Oil, Bharat Petroleum and Hindustan Petroleum are the biggest buyers of dollars, requiring about USD 8.5 billion every month to import an average 7.5 million tonnes of oil.
"The decision is aimed at removing a major source of dollar demand from the spot market," said Abhishek Goenka, CEO of India Forex Advisors. "The sustainability of this measure will be closely watched as the central bank had taken a similar measure in 2008, which provided short-lived relief."
Bank of America Merrill Lynch said in a report today the RBI will have to take far more pro-active steps to rebuild forex reserves, because if the status quo remains, the rupee could touch 75 per dollar by the end of 2014.
The rupee also got a boost on Friday from Prime Minister Manmohan Singh's assurances in Parliament on combating the currency's fall and reviving economic growth.
PM said, "Sudden decline in exchange rate is certainly a shock, but we will address this through other measures, not through capital controls or by reversing reforms."
At the same time, he said, "to some extent depreciation can be good for the economy as this will help to increase our export competitiveness and discourage imports." Singh was confident growth in this fiscal will rise to 5.5 percent from a decade's low of 5 percent in 2012-13.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "This week Rupee traded volatile. The RBI late on Wednesday announced a special window "with immediate effect" to sell dollars through a designated bank to three PSU oil companies "until further notice."
"Taking cues from this rupee traded strong for the last two days and managed to close above 66.00 levels, also the equity markets closed on a strong note which further helped Rupee to trade positively. The trading range for the Spot USD/INR pair is expected to be within 63.50 to 67.50."
The premium for the forward dollar also declined further on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in January ended weak at 221-225 paise from last weekend's close of 229-234 paise and far-forward contracts maturing in July also dipped to 410-415 paise from 434-439 paise.
The RBI fixed the reference rate for the US dollar at 66.5742 and for the euro at 88.1605 from 64.6880 and 86.3035 last weekend respectively.
The rupee tumbled further against the pound sterling to 101.86 from preceding weekend's level of 98.47 and also plunged against the euro to 87.00 from 84.40.
It too dipped against the Japanese yen to 66.91 per 100 yen from last weekend's close of 63.80.
First Published: Saturday, August 31, 2013, 17:22