Rupee weakens for fourth day; cbank policy in focus

MUMBAI Mon Dec 17, 2012 5:18pm IST

A cashier counts currency notes inside a bank in Lucknow July 16, 2009. REUTERS/Pawan Kumar/Files

A cashier counts currency notes inside a bank in Lucknow July 16, 2009.

Credit: Reuters/Pawan Kumar/Files

Related Topics

MUMBAI (Reuters) - The 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 December 4.

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

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)

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

  • Most Popular
  • Most Shared
The Wipro campus is seen in Bangalore June 23, 2009. REUTERS/Punit Paranjpe/Files

Wipro Q4 net profit beats estimates, rises 29 percent

Wipro posted a 29 percent rise in its fourth-quarter net profit, beating expectations, helped by increased IT spending by its customers. For the quarter ended March 31, the company said it earned 22.27 billion rupees compared with 17.29 billion rupees a year earlier..  Full Article | Full Coverage 


Election 2014

Election 2014

India holds biggest day of voting with BJP gaining strength  Read | Full Coverage 

Market Eye

Market Eye

Sensex jumps 351 points, snaps 3-day losing streak  Full Article 

S&P on India

S&P on India

S&P: India's ratings to depend on next govt econ, fiscal policies.  Full Article 

Ambitious Aim

Ambitious Aim

In green car race, Toyota adds muscle with fuel-cell launch.  Full Article 

Deal Talk

Deal Talk

Piramal to buy 20 percent stake in Shriram Capital for $334 million.  Full Article 

Bond Market

Bond Market

A star abroad, RBI boss riles bond traders at home  Full Article 

Reuters India Mobile

Reuters India Mobile

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