Friday 19 September 2014
 
»
 
»
Story

Indian rupee hits new record low

Mumbai, December 13, 2011

The Indian rupee touched a record low for the second day in a row on Tuesday as both foreign and domestic investors snapped up dollars to reduce exposure to India's cooling economy.

A firmer stock market provided a bit of comfort, but traders said the rupee looks to be headed lower still as worries about the euro crisis add to anxiety about slowing foreign capital inflows into emerging market economies such as India.

A growing trade deficit and the low probability of strong intervention from the Reserve Bank of India, given the limited firepower in its currency reserves, is likely to keep the rupee under pressure, traders said.

The partially convertible rupee ended at 53.22/23 to the dollar, down 0.7 per cent from Monday's close of 52.84/85, after touching a record low of 53.52 during the day.

The currency has lost 4.8 per cent of its value against the dollar in the last four weeks and 16 percent so far this year.

Investors took fright on Monday when government data showed India's industrial production fell 5.1 per cent in October, the first monthly fall in more two years and far more than expected.

'The (industrial output) data has given a bad impression about India's growth outlook,' said Uday Bhatt, senior manager of dealing at UCO Bank.

'The current account and fiscal deficit are adding to the negative view,' said Bhatt, who expects the rupee to fall to 54.50 in coming sessions.

Some traders believe the currency soon could weaken to 55 to the dollar within days.

'Any intervention from the RBI is likely to be token,' said a foreign exchange dealer with a private-sector bank. 'The one factor that could help rupee to some extent is growth-supporting steps from the RBI, like a cut in the cash reserve ratio.”

The central bank is widely expected to keep rates on hold at its review on Friday, but economists in a Reuters poll expect it to accelerate monetary easing in 2012 as economic conditions worsen in Asia's third-largest economy.

One-month offshore non-deliverable forward contracts were quoted at 53.68, lower than the onshore spot rate indicating a bearish outlook.

The one-month onshore forward dollar premium was at 33.50 points, up from 33.25 on Monday. The three-month was at 79.50, up from 75 and the one-year premium was at 225.75, up from 216.50.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX, and the United Stock Exchange ended at  53.4250, 53.4200 and 53.4150, respectively. Total volume was $6.12 billion. – Reuters




Tags: rupee | India | Dollar | Mumbai | low | Reserve Bank |

More INTERNATIONAL BUSINESS Stories

calendarCalendar of Events

Ads