Rupee falls for second day on defence demand from importers

MUMBAI Tue Jul 2, 2013 5:52pm IST

Currency of different denominations are seen in this picture illustration taken in Mumbai April 30, 2012. REUTERS/Vivek Prakash/Files

Currency of different denominations are seen in this picture illustration taken in Mumbai April 30, 2012.

Credit: Reuters/Vivek Prakash/Files

Related Topics

MUMBAI (Reuters) - The rupee fell for a second session on Tuesday, as state-run banks bought dollars to meet the government's defence needs and on continued worries that foreign investors would continue to exit domestic markets.

Continued capital inflows into local bonds and equities are essential to finance the country's current account deficit which stood at a record 4.8 percent in the fiscal year that ended in March and has been a key cause of rupee weakness.

The rupee is still not too far from the record low of 60.76 hit last week, and few analysts expect a sustained rebound, especially given concerns the Federal Reserve will end its U.S. stimulus by later this year.

Concerned about the rupee, India's central bank has discreetly phoned trading desks with unusually explicit messages to cut their speculative positions in the currency, said three senior market participants with direct knowledge of such calls.

"I think there are valid arguments for the INR weakness in May-June but we have exited that trade because we think at this level the onus is for the dollar to justify further strength backed by strong data," said Nizam Idris, head of fixed income and currency strategy at Macquarie Group.

"The USD/INR has become a lot more of a dollar view than an INR view at this level. And I am not yet convinced that the market is pricing in for September tapering and 2014 hike in Fed rates are well supported by US data for now."

The partially convertible rupee closed at 59.66/67, compared with its previous close of 59.51/52. It traded in a 59.17-59.7150 band in the session.

Foreign investors have been heavy sellers of debt and stocks in recent weeks.

Still, in the near-term, the rupee could continue to find support from rumoured inflows related to Unilever's $5.1 billion open offer for its Indian unit, dealers said.

In the offshore non-deliverable forwards, the one-month contract was at 60.05, while the three-month was at 60.74.

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 around 59.89 with a total traded volume of $4.4 billion.

(Editing by Anand Basu)

FILED UNDER:

Economic Pulse

REUTERS SHOWCASE

Nifty Above 8,600

Nifty Above 8,600

Nifty hits record high above 8,600; state-run lenders gain  Full Article 

Indian in Iraq

Indian in Iraq

India says no contact with 39 men held by Islamic State in Iraq.  Full Article 

Sahara Issue

Sahara Issue

Sahara looks to raise $650 million loan to fund bail.  Full Article 

Bhopal Tragedy

Bhopal Tragedy

Bhopal's toxic legacy lives on, 30 years after industrial disaster.  Full Article 

Essar Group

Essar Group

Exclusive - Essar's planned oil-for-steel deal tests Iran sanctions  Full Article 

Islamic Fund

Islamic Fund

India gets new Islamic equity fund but debt market still off-limits  Full Article 

Fiscal Deficit

Fiscal Deficit

April-October fiscal deficit nears 90 pct of full-year target  Full Article 

Oil Prices

Oil Prices

Oil hits new four-year low post OPEC as glut looms  Full Article 

Gold Imports

Gold Imports

India eases gold import rule in surprise move.  Full Article 

Reuters India Mobile

Reuters India Mobile

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