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:

Reforms Push

REUTERS SHOWCASE

Reuters Exclusive

Reuters Exclusive

India looks to sway Americans with nuclear power insurance plan  Full Article 

To Boost Growth

To Boost Growth

Crank up public spending to revive growth - chief economic adviser.   Full Article 

Bold Steps

Bold Steps

SpiceJet rescue plan marks bold bet on Indian aviation recovery.   Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Online Sales

Online Sales

Knock knock. Who's there? Amazon's best-selling holiday author.  Full Article 

26/11 Plotter

26/11 Plotter

Pakistan to challenge bail for Mumbai attack "mastermind".  Full Article 

Chinese Economy

Chinese Economy

China revises up size of 2013 economy, sees no effect on 2014 growth.  Full Article 

Reuters Poll

Reuters Poll

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

Reuters India Mobile

Reuters India Mobile

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