UPDATE 1-India rupee falls on heavy USD buy by state-run bank; inflation eases

Fri Dec 14, 2012 5:28pm IST

Related Topics

Stocks

   

* Rupee ends at 54.4850/4950 per dollar vs 54.46/47 on Thursday

* November inflation eases to 7.24 pct, weakest pace in 10 months

* RBI likely to hold rates, view split on CRR - Reuters Poll

* Local shares end 0.46 pct higher

By Subhadip Sircar

MUMBAI, Dec 14 (Reuters) - The Indian rupee fell to its lowest in over a week on Friday after heavy dollar buying by a large state-run bank wiped out all gains even as a below expected inflation reading raised hopes that the central bank could start cutting interest rates as early as January.

The dollar buying by the large-bank was likely related to government defence purchases, several dealers said.

Earlier, data showed that wholesale price based inflation eased, leading to gains in the equity market, and in the rupee on hopes that along with the strong factory data, it would bolster the case for the RBI to ease policy.

India's wholesale price index rose a slower-than-expected 7.24 percent in November, less than the 7.6 percent estimated by a Reuters poll.

While most economists and market participants believe the central bank may hold rates steady on Dec. 18., some are now expecting that it will infuse some liquidity in the form of a cash reserve ratio cut.

"The trending and expectation in headline inflation has improved, paving way for start of rate cut cycle in January-March 2013," said Moses Harding, head of asset liability management at IndusInd Bank.

"A CRR cut of 25 basis points is seen certain to maintain the positive feel," he said.

The government is trying to push through more reforms, approving steps on Thursday to speed up infrastructure projects and facilitate investment into the fertiliser sector.

Local stocks, which were trading flat before the data release, ended 0.46 percent higher.

The partially convertible rupee ended at 54.4850/4950 per dollar, marginally weaker than its Thursday close of 54.46/47. It fell to 54.70 in the session, its lowest level since Dec. 4.

In the offshore non-deliverable forwards, the one-month contract was at 54.74, while the three-month was at 55.26.

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 all closed at around 54.58, with total traded volume of $6.4 billion. (Editing by Jijo Jacob and Anand BAsu)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

School Shooting

School Shooting

Two killed, four wounded in Washington state school shooting.  Full Article 

Sundar Pichai Elevated

Sundar Pichai Elevated

Google's Pichai to oversee major products and services.  Full Article 

Need For Reforms

Need For Reforms

Euro zone risks "relapse into recession" without structural reforms - Draghi.  Full Article 

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Health Of Lenders

Health Of Lenders

25 European banks set to fail health checks - sources.  Full Article 

Special Report

Special Report

Why Madrid's poor fear Goldman Sachs and Blackstone  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage