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:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Reuters Showcase

Divestment Plans

Divestment Plans

ONGC share sale scheduled for this fiscal - oil minister.  Full Article 

Market Eye

Market Eye

Sensex, Nifty retreat from record highs on profit-taking.  Full Article 

Tech Talk

Tech Talk

Apple takes high road in China smartphone standoff with Xiaomi.  Full Article 

Business Strategy

Business Strategy

Uber scraps commissions for its New Delhi taxis.  Full Article 

Currencies

Currencies

China's yuan breaks into the world's top five as payment currency - SWIFT.  Full Article 

Job Cuts

Job Cuts

Sony to cut 1,000 jobs in smartphone business - sources.  Full Article 

Reuters India Mobile

Reuters India Mobile

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