Rupee gains; Fitch warning clouds outlook

MUMBAI Tue Jan 8, 2013 5:44pm IST

An employee counts currency notes at a cash counter inside a bank in Kolkata June 18, 2012. REUTERS/Rupak De Chowdhuri/Files

An employee counts currency notes at a cash counter inside a bank in Kolkata June 18, 2012.

Credit: Reuters/Rupak De Chowdhuri/Files

Related Topics

Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

MUMBAI (Reuters) - The rupee rose on Tuesday helped by continued inflows into local equities, but a warning from Fitch on the country's ratings again highlighted the headwinds facing the domestic currency.

Foreign funds have continued to buy into Indian equities, having invested over $1 billion already in January after pumping in $24 billion in 2012, helping shares post their best gains in three years.

But a warning from Fitch Ratings that India was still at risk of losing its investment grade rating saw the rupee giving up all gains, before recovering in late session.

"The rupee was helped by some ECB (external commercial borrowing) flows today. But I think the ratings downgrade threat and current account deficit will keep a weakening bias for the rupee," said Uday Bhatt, a forex dealer with UCO Bank.

The partially convertible rupee closed at 54.99/00 per dollar, stronger than Monday's close of 55.23/24, snapping three sessions of losses. It fell to 55.38 in session at one point, an over one-month low.

Technicals charts show that the dollar/rupee should find resistance at 55.45 which is the 76.4 percent retracement of the 55.89-54.04 move between November 26 and December 6.

Fitch reiterated on Tuesday its "negative" outlook on India's sovereign credit rating, citing concerns about slowing economic growth, persistent inflationary pressures and an uncertain fiscal outlook.

The warning comes after data last week showed the country's current account deficit widened to a record high in the September quarter.

Dealers are now waiting the release of crucial December inflation data on Monday to gauge whether the RBI delivers a much expected rate cut on January 29. Any cut would lead to a rally in the rupee via gains in equities.

In the offshore non-deliverable forwards, the one-month contract was at 55.31 while the three-month was at 55.89.

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 55.21 with a total traded volume of $5.3 billion.

(Additional reporting by Krishnakumar K; 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

Market Eye


Asian Markets

Asian Markets

Asian stocks flat after China PMI meets expectations  Full Article 

Chinese Economy

Chinese Economy

Factory activity shrinks for 4th month; pace of decline slows   Full Article 

International Gold

International Gold

Gold hovers near 2-1/2 month lows on firm equities, fund outflows  Full Article 

GM Lawsuit

GM Lawsuit

GM seeks U.S. court protection against ignition lawsuits  Full Article 

Reuters India Mobile

Reuters India Mobile

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