Rupee hits three-week low; falls for fifth day

MUMBAI Tue Dec 18, 2012 5:19pm IST

Rupee notes of different denominations are seen in this picture illustration taken in Mumbai April 30, 2012. REUTERS/Vivek Prakash/Files

Rupee notes of different denominations are seen in this picture illustration taken in Mumbai April 30, 2012.

Credit: Reuters/Vivek Prakash/Files

Related Topics

MUMBAI (Reuters) - The 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 November 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.

The Sensex 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:
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.

Barack Obama in India

Reuters Showcase

Coal Mining

Coal Mining

India to open coal to commercial mining firms soon, minister says  Full Article 

RBI Loan Rules

RBI Loan Rules

RBI relaxes overseas loan recast rules   Full Article 

E-commerce Firms

E-commerce Firms

Amazon, e-commerce rivals fuel commercial property boom in India  Full Article 

Growth Forecasts

Growth Forecasts

Indian economic growth forecasts pegged back, despite rate cuts: Reuters Poll.  Full Article 

Uber is Back

Uber is Back

Uber back in Delhi; govt says must await approval.  Full Article 

Markets at Record

Markets at Record

Sensex rises to record after ECB stimulus programme.  Full Article 

Pharma Sector

Pharma Sector

Ipca Labs hit by FDA ban on plant for standard violations.  Full Article | Related Story 

Forex Reserves

Forex Reserves

India FX reserves at record high as RBI fortifies defences  Full Article 

QE for Euro Zone

QE for Euro Zone

ECB launches 1 trillion euro rescue plan to revive euro economy.  Full Article 

Reuters India Mobile

Reuters India Mobile

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