Indian rupee lower on weak shares, banks' USD demand; gold tax positive

Tue Jan 22, 2013 5:20pm IST

Related Topics

* Rupee ends at 53.81/82 per dlr vs 53.765/775 on Monday

* Higher import tax to curb gold-related USD demand - dealers

* RBS says expects meaningful rupee gains in Dec quarter

By Subhadip Sircar

MUMBAI, Jan 22 (Reuters) - The Indian rupee came off near three-month highs to end lower on Tuesday after gains from the government's move to raise the import tax on gold were erased by dollar demand from state-run banks and weak equities.

The government, late on Monday, raised the import duty on gold by 2 percentage points to 6 percent in a bid to curb purchases and rein in the country's bloated current account deficit.

Gold-related dollar demand by importers constitutes an important source of greenback demand in the foreign exchange market, which dealers estimate at around $150-$170 million on a daily basis.

Nomura said the move may help in part to lower the current account deficit to 4.3 percent of GDP in FY14 from an estimated 4.9 percent in the current fiscal year.

The current account and fiscal deficits have been a drag on the rupee and been a major worry for foreign investors.

"We need portfolio capital flows in line with easing of the trade deficit for the rupee to appreciate," said Rajesh Cheruvu, chief investment officer, India-private banking at RBS.

He expects the rupee to trade in a 53-55 range and only see a meaningful rise in the December quarter, aided by a growth recovery.

The Indian government recently allowed refiners to raise diesel prices in small measures, adding to the recent steps taken to assuage foreign investor sentiment and rating agencies.

Finance Minister P. Chidambaram met investors in Hong Kong on Tuesday as part of a four-city tour to boost capital inflows.

The partially convertible rupee closed at 53.81/82 per dollar, weaker than its 53.765/775 close on Monday. It rose to 53.3750 earlier in the session, its highest level since Oct. 24.

Indian shares snapped a three-day winning streak on Tuesday after Hindustan Unilever earnings disappointed on volume growth, ending 0.6 percent lower.

In the offshore non-deliverable forwards, the one-month contract was at 54.04, while the three-month was at 54.60.

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 53.7525 with a total traded volume of $7.7 billion. (Editing by Anupama Dwivedi)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Canada Shooting

Canada Shooting

Attack on parliament, killing of soldier stun Canada's capital.  Full Article 

Earnings Season

Earnings Season

Wipro sees rosier end to year as U.S. clients spend.  Full Article 

Business Climate

Business Climate

Fears for tough penalties grow as India cleans up business  Full Article 

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

DLF Appeals

DLF Appeals

DLF seeks interim relief from capital market ban  Full Article 

Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Book Keeping

Book Keeping

RBI fires warning shots on companies' lack of FX hedging.  Full Article 

Policy Repo Rate

Policy Repo Rate

Most external members suggested rate cut in RBI's Sept review.  Full Article 

Reuters India Mobile

Reuters India Mobile

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