India rupee hits 3-week low; falls for fifth day as RBI disappoints

Tue Dec 18, 2012 5:13pm IST

Related Topics

* Rupee ends at 54.85/86 per dlr vs 54.84/86 on Monday

* Strong dlr demand from oil, defence firms hurts rupee

* Exporters refrain from selling dlrs after RBI stays on hold

By Swati Bhat

MUMBAI, Dec 18 (Reuters) - The Indian rupee dropped for a fifth straight day, weakening to its lowest level in three weeks on Tuesday as heavy dollar demand from oil and defence firms offset inflows into the domestic stock markets.

Exporters also refrained from selling dollars at current levels on expectations of further weakness after the central bank disappointed markets by keeping key rates on hold at its policy review. Though the outcome was widely expected, investors had been hoping for a surprise cut in rates.

The central bank maintained a status quo ignoring government pressure to reduce borrowing costs, but said it was shifting its focus towards boosting a flagging economy, raising the odds of a rate cut as early as January.

"Stocks, euro and all other things are positive but the INR is weakening because of strong demand. Once that demand is over, we may see some positive moves in the rupee," said Uday Bhatt, a foreign exchange dealer with UCO Bank.

"There are flows but demand surpasses that. There was good demand from oil and defence heard today. I expect the pair to move in a 54.75 to 55.10 range tomorrow," he added.

The partially convertible rupee closed at 54.85/86 per dollar, after having dropped as low as 55.0550, its weakest since Nov. 29. The unit had closed at 54.84/86 on Monday.

Oil firms, the largest buyers of dollars in the domestic currency market, have been buying the greenback aggressively in recent sessions, hurting the rupee.

The dollar index fell to a two-month low on Tuesday, with the U.S. currency dipping against the euro after signs of progress in negotiations over the so-called U.S. fiscal cliff helped lift market sentiment.

Indian shares rose led by lenders such as SBI, as hopes parliament will pass the banking amendment bill outweighed disappointment after the RBI policy decision.

In the non-deliverable forwards market, the one-month contract was at 55.17 while the three-month was at 55.66.

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 54.96 with a total traded volume of 5.14 billion. (Editing by G.Ram Mohan)

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

Top News

REUTERS SHOWCASE

Mideast Conflict

Mideast Conflict

Israel says ready to extend short Gaza truce; death toll crosses 1000.  Full Article 

India-WTO Standoff

India-WTO Standoff

India threatens to derail WTO deal, prompts angry U.S. rebuke  Full Article 

Economic Pulse

Economic Pulse

New govt promises low and stable tax regime for economic revival.  Full Article 

IPO Probe Ends

IPO Probe Ends

Facebook says SEC's IPO probe ends, extending WhatsApp closing date  Full Article 

World Stocks

World Stocks

Goldman Sachs downgrades stocks to neutral for short term  Full Article 

Not Wanted

Not Wanted

Hard to see how Russia can ever be let back into G7 club - Canada PM.  Full Article 

Disappointing Results

Disappointing Results

Amazon's far-reaching ambitions, lack of profits, unnerve investors  Full Article 

Global Growth

Global Growth

IMF cuts outlook, warns of stagnation risk in rich nations  Full Article 

Reuters India Mobile

Reuters India Mobile

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