Indian rupee posts longest losing streak in nearly 6 months

Fri Nov 23, 2012 5:23pm IST

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By Swati Bhat

MUMBAI, Nov 23 (Reuters) - The Indian rupee fell to over two-month lows on Friday, marking a fourth straight weekly loss for the currency and its longest losing streak in nearly six months, weighed down by persistent dollar buying by oil companies.

However, the central bank is believed to have sold dollars via state-run banks around 55.50 levels, putting brakes to a steeper fall in the currency.

Although the Reserve Bank of India has been speculated to have acted before, Friday's session marked the first clear signal of dollar sales since mid-October, dealers said.

The rupee has lost 3.6 percent of its value over these four weeks, with global markets weakening and amid growing worries about whether the government can contain the fiscal deficit and push through reforms in the winter session of parliament that kicked off this week.

"With month-end dollar demand still going through, the pressure is on the rupee to weaken. However, the market will be cautious of intervention from the central bank," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.

"There was a strong resistance at 55.40 for the USD/INR which, once broken, gave way to further gains. Now 56.10 is the next key level," he added.

The partially convertible rupee closed at 55.5350/5450 per dollar versus its previous close of 55.21/22. The unit dropped 0.6 percent on day, taking its fall to 0.7 percent on the week. The rupee fell to 55.53 during the day, its weakest since Sept. 11.

Traders said sustained dollar buying by oil firms, the biggest buyers of dollars in the domestic currency market, hurt the rupee on Friday.

Despite the recent trend of weakness, the rupee remains far away from the bearishness seen in the nine weekly losses to June 1, when the unit had lost 8.4 percent, in its worst losing streak since the Lehman crisis.

The rupee had hit a record low of 57.32 on June 22.

Dealers said they expect the pair to hold in a 55 to 56.10 band next week, with exporters expected to step in to sell dollars around 56-56.10 levels.

Traders said they will continue to monitor developments at the winter session of parliament for indications of its likely impact on foreign fund flows. The sessions, however, have so far been marred with adjournments with no key decisions taken.

The market is keenly waiting to see if the government can pass key reforms such as foreign direct investment in pension and insurance, as well as the banking amendment bill. Failure to pass any of the key reforms could even eventually push the rupee down towards 57-levels traders said.

In the offshore non-deliverable forwards market, the one-month contract was at 55.81 while the three-month was at 56.40.

Westpac says 1-month USD/INR NDF could push above the 56 level in coming weeks as fundamentals still suggest a near-term turnaround is unlikely, even as valuations on a NEER basis are cheap compared with the rest of Asia.

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 closed at around 55.58 with a total traded volume of around $5.3 billion. (Editing by Anupama Dwivedi)

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Comments (1)
CommunalAward wrote:
Each State In India Should Have Their Unique Currency.

Nov 23, 2012 10:07pm IST  --  Report as abuse
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