Mumbai: Extending losses for the fourth straight week, the Indian rupee dipped by another 87 paise to close at nearly 10-month low of 56.50 against the Greenback durind the week under review following sustained dollar demand from importers and some banks amid late weakness in local equities.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 55.78 a dollar from last weekend's close of 55.63 and moved in a wide range between a high of 55.52 and a low of 56.76 before closing the week at 56.50, displaying a fall of 87 paise or 1.56 percent.
The Indian benchmark Sensex this week closed just up by 55.97 points or 0.28 percent while FIIs injected USD 684.51 mln in equities during the first four days of the week.
Continued dollar demand from importers, mainly oil refiners, to meet their month end requirements and also from gold importers and defence-related purchases weighed on the rupee.
"The rupee's fall was not due to any fundamental reason as such. Some short-term dollar demand due to month end and defence-related purchases pulled it down," said K Hariharan, Treasurer at First Rand Bank.
Worsening government's current acount deficit (CAD) also hit the rupee to some extent. CAD hit a record high of 6.7 percent of GDP in Q4 2012 and was expected to narrow to 4-4.5 percent of the GDP in the first quarter of this calendar year on the back of cheaper commodities.
IDBI Bank Head of Treasury N S Venkatesh said: "Rupee weakness was mainly due to strengthening of dollar against all major currencies on the back of positive economic data emanating from that country."
Rupee also suffered losses after RBI Governor D Subbarao painted a dim macro economic picture fuelling fears of local currency plunging to record low levels in the short-term.
Ahead of expectations of steady US GDP and jobs data that may force Federal Reserve to consider early withdrawal of stimulus, the US dollar strengthened against major rivals.
Subbarao in Ahmedabad said CPI inflation is still high.
"There are certain factors like sectoral imbalances...We have the highest fiscal deficit as compared to our peer emerging economies...Our external sector problem is large current account deficit," he said.
Mr. Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt. Ltd. Said,"This month Rupee was surrounded by many negative points like record current account deficit, high inflation, the dollar buying by defence, oil firms and Foreign banks for squaring off their offshore positions further the recent global dollar rally after it was known that the US Fed may gradually phase out its asset purchases, weakened the Rupee and depreciated by 4.8 percent, posting its worst monthly fall since May 2012. It became the worst performer in Asia during the month."
"The RBI cut interest rates by 25 basis points this month and India saw its inflation figure ease below 5 percent. However, GDP data on May 31 came in line with expectations, lowering hopes of further rate action. Recommended to Sell USDINR on rise as overall Rupee is expected to bounce back," he added.
The premium for the forward dollar closed mixed on alternate bouts of receipts and payments.
The benchmark six-month forward dollar premium payable in October ended weak at 142-144 paise from last weekend's close of 146-1/2-148 paise while far-forward contracts maturing in April rose to 306-1/2-308-1/2 paise from 305-307 paise.
The RBI fixed the reference rate for the US dollar at 56.4958 and for the euro at 73.6807 as against preceding weekend's level of 55.6075 and 71.9415 respectively.
The rupee remained weak against the pound sterling to 85.97 from last weekend's level of 84.10 and also dipped further to 73.39 per euro from 72.14.
It too tumbled against the Japanese yen to 56.33 per 100 yen from previous weekend's close of 54.90.
First Published: Saturday, June 1, 2013, 17:04