Rupee falls on sustained oil demand

MUMBAI Mon Jan 21, 2013 5:25pm IST

An employee arranges currency notes at a cash counter inside a bank in Agartala February 18, 2010. REUTERS/Jayanta Dey/Files

An employee arranges currency notes at a cash counter inside a bank in Agartala February 18, 2010.

Credit: Reuters/Jayanta Dey/Files

Related Topics

MUMBAI (Reuters) - The rupee fell on Monday, retreating from a two-and-a-half-month high hit earlier in the session and snapping two sessions of gains, due to sustained dollar demand from oil refiners.

The dollar demand from oil refiners looking to meet payment obligations offset purchases of the local currency by foreign funds in a session with thin trading volumes because of a U.S. public holiday.

However, the rupee recovered some losses in late trade after a finance ministry official said that import duty on gold and platinum has been raised to 6 percent from 4 percent.

Gold imports constitute a key demand for dollars in the domestic currency market after oil.

A global risk-on environment, expectations of interest rate cuts from Reserve Bank of India and the government's recent fiscal consolidation steps have spurred gains in domestic shares that have attracted foreign flows.

Inflows into Indian stocks are already at $2.45 billion so far in 2013, coming on the back of sustained capital flows of over $24 billion in the previous year.

However, the country's fiscal and current account deficits will likely continue to be a drag on the currency.

"The fundamental position on the current account deficit will not come down. Oil and gold importer-related demand will keep the dollar bid with the rupee to weaken to 54.80 levels in the run-up to the budget," said Param Sarma, chief executive at NSP Forex.

The partially convertible rupee closed at 53.765/775 per dollar, weaker than its 53.71/72 close on Friday. It rose to 53.63 in session, its highest level since November 2.

Analysts, however, expect the rupee to be supported this week, with shares buoyant because of improving corporate earnings, while the government's measure to allow fuel retailers to increase diesel prices gradually has also shored up confidence in domestic markets.

Moody's, in a report dated January 17, reiterated its "stable" outlook on India's ratings, citing the country's potential economic growth, robust domestic savings rate and a dynamic private sector.

The affirmation assuages some concerns at a time when both the other two global rating agencies -- Standard & Poor's and Fitch -- have a negative watch on the country's rating due to India's fiscal and current account deficits among other factors.

In the offshore non-deliverable forwards, the one-month contract was at 54.05, while the three-month was at 54.59.

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 53.9725 with a total traded volume of $5.7 billion.

(Editing by Gopakumar Warrier)

FILED UNDER:

Fast-tracking Projects

REUTERS SHOWCASE

Oil Prices

Oil Prices

Brent edges further above $61 as companies cut upstream investments.  Full Article 

GST Bill

GST Bill

Cabinet clears bill for nationwide goods and services tax.  Full Article 

Aviation Sector

Aviation Sector

Breakingviews: SpiceJet rescue is no fix for India aviation woes.  Full Article 

Global Economy

Global Economy

Fed confident on U.S. growth, opens door wider to rate hike.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Banking Sector

Banking Sector

Japan banks to bulk up India presence on improving ties   Full Article 

Reuters India Mobile

Reuters India Mobile

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