India rupee weakens for fourth day; cbank policy in focus

Mon Dec 17, 2012 5:13pm IST

Related Topics

* Rupee ends at 54.84/86 per dlr vs 54.485/495 at pvs close

* All round dlr buying seen from importers; hurts rupee

* Cbank widely expected to keep rates unchanged on Tues-poll

By Swati Bhat

MUMBAI, Dec 17 (Reuters) - The Indian rupee weakened for a fourth straight session on Monday as importers including oil refiners stepped up dollar purchases while the lack of dollar inflows exaggerated the local unit's fall.

Traders said losses in the domestic share market further added to the negative sentiment for the rupee.

Caution also prevailed ahead of the Reserve Bank of India's policy review on Tuesday. The central bank is expected to keep interest rates unchanged, but may deliver a cut in the cash reserve ratio (CRR) for banks, analysts said.

However, some analysts, including Goldman Sachs, said the RBI may deliver a surprise rate cut after data on Friday showed much lower-than-expected inflation last month.

"I think the RBI has a knack of surprising markets, so I am expecting a rate cut tomorrow," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

"But in either case, medium-term view for the rupee is weak. In case of a rate cut, it may be seen as a dip which can be used to buy," he said.

The partially convertible rupee closed at 54.84/86 per dollar, weaker versus its previous close of 54.4850/4950. It dropped as low as 54.89 in late trade, its weakest since Dec. 4.

Shares were choppy ahead of the policy. The main share index closed down 0.4 percent.

Traders said oil firms, the biggest buyers of dollars in the domestic currency market, were also among the key buyers in the market. Some exporters however stepped in to sell the greenback around 54.80 levels, limiting a further sharp fall.

Looking ahead to 2013, the RBI is widely expected to start cutting interest rates as early as January, which may bolster confidence about the economic outlook and lift the rupee.

However, investors will also monitor the government's efforts to contain the fiscal deficit for the year ending in March at 5.3 percent, given uncertainty over stake sales in state-run companies and soaring subsidies.

In the non-deliverable forwards market, the one-month contract was at 55.19 while the three-month was at 55.68.

In the onshore forwards, the one-month premium rose to 35 points from 32 points on Friday while the 1-year fell to 319.25 points from 323.75 points.

In the currency futures market, the most-traded near-month dollar/rupee contract on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 54.9250 with a total traded volume of $4.84 billion. (Editing by Sunil Nair)

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

Shares Hit Record

Sensex, Nifty rise to second consecutive record high

Sensex surges 500 points on BOJ easing, L&T gains

The BSE Sensex and Nifty surged to record highs for a second consecutive session on Friday after Bank of Japan's surprise expansion of its massive stimulus programme raised hopes for additional foreign inflows, boosting blue-chips such as Larsen & Toubro.  Full Article 

REUTERS SHOWCASE

Wilful Negligence?

Wilful Negligence?

SEBI piles pressure on Sahara to sell overseas hotels  Full Article 

Indian Economy

Indian Economy

India's fiscal deficit in H1 almost 83 pct of full-year target.  Full Article 

M&M Earnings

M&M Earnings

M&M Q2 net profit down 4 percent, hit by poor monsoon.  Full Article 

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 

Commodities

Commodities

Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Reuters India Mobile

Reuters India Mobile

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