Indian rupee falls; lower core inflation spurs rate cut hopes

Thu Mar 14, 2013 5:32pm IST

Related Topics

Stocks

   

* USD/INR ends at 54.3550/3650 vs 54.30/31 on Wednesday

* February core inflation eases to 3.8 pct - analysts

* Stocks end 3-day losing streak, up 1.1 pct

By Subhadip Sircar

MUMBAI, March 14 (Reuters) - The Indian rupee fell on Thursday, dragged by a late fall in the euro, giving up gains accrued after data showed core inflation eased and the central bank governor was seen by investors as endorsing the government's 2013/14 budget.

The euro fell to a three-month low against a broadly buoyant dollar as economic and political concerns in the euro zone contrasted a string of positive data from the United States.

Earlier, Reserve Bank of India chief's comments on the budget and a drop in core inflation raised hopes that the central bank will cut interest rates next week.

The currency made gains after non-food manufacturing inflation, which the central bank uses to gauge demand-driven price pressures, slowed to 3.8 percent in February, the weakest pace since March 2010.

That helped offset initial concerns after data showed headline inflation had risen more than expected.

Sentiment improved after RBI Governor Duvvuri Subbarao, speaking in London on Wednesday, called the federal budget "responsible," a comment that buoyed markets given that the central bank had expressed concerns about fiscal deficit earlier.

"USD/INR sold off after the inflation data. The market took solace from lower core inflation number," said Hari Chandramgethen, head of forex trading at South Indian Bank.

The partially convertible rupee closed at 54.355/365 per dollar versus its previous close of 54.30/31. The local unit traded in a 54.17-54.5325 band in the session.

The rupee was also helped by gains in Indian shares, with the benchmark BSE index ending up 1.1 percent on the inflation data.

With the inflation data out, the focus will shift to the RBI's policy review on March 19. A rate cut, the central bank's second easing this year, would help improve confidence about economic growth, potentially sparking gains in the rupee.

In the offshore non-deliverable forwards, the one-month contract was at 54.77, while the three-month was at 55.38.

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 54.53 with a total traded volume of $6.2 billion. (Editing by Jijo Jacob)

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

Diplomacy

REUTERS SHOWCASE

Maruti Results

Maruti Results

Maruti Suzuki says profits helped by sentiment, not growth.  Full Article 

Tracking the Monsoon

Tracking the Monsoon

Monsoon turns patchy after revival.  Full Article 

ICICI Profit Up

ICICI Profit Up

ICICI Bank Q1 net profit up 17 percent, beats estimates.  Full Article 

Pharma Sector

Pharma Sector

FDA raises concern over drug production process at Cadila  Full Article 

Coal India

Coal India

Some Coal India mines may be run by foreign firms - minister  Full Article 

Fuel Prices

Fuel Prices

IOC to cut petrol prices by 1.5 pct from Friday  Read 

Economic Pulse

Economic Pulse

India's infrastructure output growth hits 9-month high in June  Full Article | Related Story 

Joint Bid

Joint Bid

ONGC, Oil India bid $1.5 bln for stake in Murphy Oil's Malaysia assets - sources  Full Article 

Reuters India Mobile

Reuters India Mobile

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