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:

Reuters Showcase

Markets Weekahead

Markets Weekahead

Focus on sectors which will build India: Ambareesh Baliga.  Full Article 

FMC-SEBI Merger

FMC-SEBI Merger

Regulatory shakeup could revive commodities markets   Full Article 

Tax Incentives

Tax Incentives

Budget woos foreign investors  Full Article 

Excise Duty

Excise Duty

Cigarette makers fall after budget hikes excise duty  Full Article 

Welcoming the Budget

Welcoming the Budget

India Inc cheers corporate tax cut, simpler rules  Full Article 

Gold Price

Gold Price

Gold prices to rise after budget keeps import duty high  Full Article 

Fuel Prices

Fuel Prices

IOC to raise diesel, petrol prices from Sunday  Full Article 

Moody's on Budget

Moody's on Budget

Budget "credit neutral" from a ratings perspective - Moody's   Full Article 

Reuters India Mobile

Reuters India Mobile

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