Rupee hits three-week low; 'fiscal cliff' progess eyed

MUMBAI Fri Dec 21, 2012 5:22pm IST

A Kashmiri woman walks under a garland made of rupee notes on display at a market in Srinagar September 3, 2012. REUTERS/Fayaz Kabli/Files

A Kashmiri woman walks under a garland made of rupee notes on display at a market in Srinagar September 3, 2012.

Credit: Reuters/Fayaz Kabli/Files

Related Topics

MUMBAI (Reuters) - The rupee hit a three-week low on Friday, extending its fall for a third straight week, as uncertainty over the U.S. "fiscal cliff" resolution dented demand for risk assets including domestic equities.

Traders said month- and year-end dollar demand from oil and gold importers also added to the downward pressure on the local currency. Oil firms bought the greenback aggressively this week while gold importers purchased the U.S. unit to take advantage of relatively lower global gold prices.

"INR has been choppy and I expect it to remain so in the last week as well. The U.S. fiscal agreement will be important for the market," said Paresh Nayar, head of fixed income and forex trading at First Rand Bank.

"54.10 is showing good support while 55.45 is the first technical resistance. I expect the pair to hold in that broad range next week," Nayar added.

The partially convertible rupee closed at 55.06/07 per dollar versus its previous close of 54.8450/8550. The unit fell to a low of 55.2550, its weakest since November 29.

On the week, the rupee shed 1 percent of its value, marking its third consecutive weekly fall.

Traders said dollar sales by exporters around the 55.20 to 55.25 levels helped the rupee recover some of its losses from the day's lows but the weakness in shares hurt.

The Sensex ended lower, marking a second week of declines, as lenders were hit by profit-taking, while Bharti Airtel fell after federal police filed charges as part of a probe into alleged corruption in allocation of mobile airwaves.

Sentiment for the rupee has also been dented by a status quo at the central bank's policy review earlier this week. The RBI kept interest rates on hold on Tuesday, 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.

Global stock markets weakened on Friday and both the euro and gold slipped, as a new setback in talks to avert a U.S. fiscal crisis and evidence of Europe's ongoing economic difficulties stoked investor nerves.

In the offshore non-deliverable forward market, the one-month contract was at 55.43 while the three-month was at 55.95.

In the currency futures market, the most-traded near-term dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange closed at around 55.1975 with a total traded volume of $5.38 billion.

(Editing by Subhranshu Sahu)

FILED UNDER:

Reuters Showcase

FMC-SEBI Merger

FMC-SEBI Merger

Regulatory shakeup could revive commodities markets   Full Article 

Market Eye

Market Eye

Sensex, Nifty end higher after bumpy budget-day trading  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