Mumbai: Although the rupee recovered on the last day of the week after touching a life-time intra-day low of 65.56 on Thursday, it continued its downslide for the second straight week to end down by another 155 paise at 63.20 against the Greenback following sustained weakness in local equities, despite some measures taken by the government and the central bank to stem the rupee fall.
Persistent dollar demand from importers, mainly oil refiners, and some banks also weighed on the rupee.
The week saw record breaking movements. On Monday, it breached 63-mark for the first time in the history and registered the decade's worst single day fall of 148 paise on heightening fears that more capital control steps could be offing. The previous biggest fall in decade was the 124 paise or 2.57 percent plunge on September 22, 2011.
On Tuesday, it breached 64-mark and on Thursday 65-level to logged its new historic low while on Friday, it bounced back with a vengeance by 135 paise which was also the second biggest rise in absolute term in a decade.
At the Interbank Foreign Exchange (Forex) market, the local unit resumed lower at 62.30 a dollar from last weekend's close of 61.65 and moved in a wide range between 62.21 and 65.56 before settling the week at 63.20, showing a fall of 155 paise or 2.51 percent.
In order to arrest the rupee slide, RBI last week had announced measures such as restriction on Indian firms investing abroad and on outward remittances by resident Indians, triggering talks of return of capital control regime.
The currency's slide continued amid steps by the Reserve Bank of India (RBI) Tuesday to increase availability of cash in the banking system. Expectations the US Federal Reserve would start withdrawing its bond-buying programme next month also weighed on the currency.
Worried over a spike in interest rates in the wake of steps to support the falling rupee, the RBI Tuesday announced a slew of measures to ease liquidity, including a Rs 8,000 crore bond buyback, and ensure adequate credit flow to productive sectors of the economy.
The government is exploring structural measures to narrow the current account deficit, Finance Minister P Chidambaram said, adding there is no plan to introduce capital control.
Finance Minister P Chidambaram on Thursday said the rupee is undervalued and has overshot appropriate levels while asserting there is no need for excessive and unwarranted pessimism. The Reserve Bank said it has adequate foreign exchange reserves to deal with the declining rupee.
"Nationalised banks sold dollars on Friday, probably on behalf of the Reserve Bank. Corporates also sold dollars as they expect that the government and the RBI are serious towards curbing volatility in forex market," said Agam Gupta, managing director and head of fixed income trading at Standard Chartered Bank.
Barclays cut its forecast of India's FY13-14 current account deficit to about USD 68 billion from about USD 80 billion earlier and said the country may be able to almost fully fund the CAD. It said the rupee may recover to about 61 per US dollar in the next 12 months, largely on the back of a narrowing CAD.
"This week on Thursday for the fifth consecutive day the rupee made new all-time low. For the week, it depreciated by almost 6.25 per cent to trade at a new all-time low of 65.56," Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt Ltd, said.
"Foreign investors have been pulling money out of India, as the economy has slowed and the cost of borrowing in dollars has risen. Another source of concern in India is the country's widening current account deficit," he added.
"India, which is Asia's third-largest economy, grew at an annual rate of 5 percent in 2012-13, the slowest pace in 10 years. The trading range for the Spot USD/INR pair is expected to be within 62.00 to 65.00.
The rupee has declined by nearly 22 percent against the US dollar since May and is Asia's worst performing currency so far this year. But on the last trading day of the week, the RBI intervened strongly to help spot Rupee to appreciate by more than 2 percent," Pramit Brahmbhatt, said.
The benchmark S&P BSE Sensex this week declined by 78.74 points or 0.42 percent despite recovery in last two days of the week.
The premium for the forward dollar reacted downwards on fresh receivings by exporters.
The benchmark six-month forward dollar premium payable in January finished sharply lower at 229-234 paise as against the last weekend's level of 261-1/2-264-1-2 paise and far-forward contracts maturing in July also tumbled to end at 434-439 paise from 504-508 paise.
The RBI fixed the reference rate for the US dollar at 64.6880 and for the euro at 86.3035 from previous weekend's level of 61.8195 and 82.4510, respectively.
The rupee continued to rule weak against the pound sterling to 98.47 from preceding weekend's close of 96.41 and also dropped further against the euro to end at 84.40 from last weekend's close of 82.26.
It too declined against the Japanese yen to 63.80 per 100 yen from previous close of 63.24.
First Published: Saturday, August 24, 2013, 16:21