* Rupee ends at 54.85/86 per dlr vs 54.84/86 on Monday
* Strong dlr demand from oil, defence firms hurts rupee
* Exporters refrain from selling dlrs after RBI stays on
By Swati Bhat
MUMBAI, Dec 18 The Indian rupee dropped for a
fifth straight day, weakening to its lowest level in three weeks
on Tuesday as heavy dollar demand from oil and defence firms
offset inflows into the domestic stock markets.
Exporters also refrained from selling dollars at current
levels on expectations of further weakness after the central
bank disappointed markets by keeping key rates on hold at its
policy review. Though the outcome was widely expected, investors
had been hoping for a surprise cut in rates.
The central bank maintained a status quo ignoring government
pressure to reduce borrowing costs, but said it was shifting its
focus towards boosting a flagging economy, raising the odds of a
rate cut as early as January.
"Stocks, euro and all other things are positive but the INR
is weakening because of strong demand. Once that demand is over,
we may see some positive moves in the rupee," said Uday Bhatt, a
foreign exchange dealer with UCO Bank.
"There are flows but demand surpasses that. There was good
demand from oil and defence heard today. I expect the pair to
move in a 54.75 to 55.10 range tomorrow," he added.
The partially convertible rupee closed at 54.85/86
per dollar, after having dropped as low as 55.0550, its weakest
since Nov. 29. The unit had closed at 54.84/86 on Monday.
Oil firms, the largest buyers of dollars in the domestic
currency market, have been buying the greenback aggressively in
recent sessions, hurting the rupee.
The dollar index fell to a two-month low on Tuesday, with
the U.S. currency dipping against the euro after signs of
progress in negotiations over the so-called U.S. fiscal cliff
helped lift market sentiment.
Indian shares rose led by lenders such as SBI, as hopes
parliament will pass the banking amendment bill outweighed
disappointment after the RBI policy decision.
In the non-deliverable forwards market, the one-month
contract was at 55.17 while the three-month was at 55.66.
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 54.96
with a total traded volume of 5.14 billion.
(Editing by G.Ram Mohan)