MUMBAI (Reuters) - The rupee fell on Friday to approach a record low on sustained dollar demand from importers, forcing the RBI to intervene to support the currency, according to traders.
The Reserve Bank of India was cited selling dollars via state-run banks after the rupee fell to the day’s low of 60.59, not far from its life low of 60.76 touched on June 26.
However, the central bank’s intervention has not been strong during the current bout of rupee weakness, with Governor Duvvuri Subbarao’s comments on Thursday about the RBI not targeting any particular exchange rate also deepening the uncertainty.
In the near-term, investors will closely watch the U.S. monthly employment data due out later in the day. Analysts expect U.S. job growth to have slowed in June, but not enough to shift the Federal Reserve away from expectations that it will start scaling back its massive monetary stimulus later this year.
Markets are also awaiting potential measures from the government to open up more sectors for foreign investment in a bid to narrow a record high current account deficit that has now helped send the rupee to a ninth consecutive weekly fall.
“The rupee’s outlook is still negative. The government is not coming up with any strong response. Oil prices are going up, which may widen the current account deficit,” said Subramanian Sharma, director at Greenback Forex.
The partially convertible rupee closed at 60.225/235, compared with its previous close of 60.13/14.
The rupee fell 1.4 percent for the week and its nine-week losing streak is the longest since the last one ended June 3, 2012.
Analysts feel that the government and central bank will be forced to unveil new steps if the rupee does not stop its slide.
An overseas bond issue targeted at non-resident Indians is one of the options the government has, while the central bank can again open a dollar window for oil refiners to take a big chunk of dollar demand out of the market.
In the offshore non-deliverable forwards, the one-month contract was at 60.64, while the three-month was at 61.30.
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 60.58 with a total traded volume of $5.6 billion. (Editing by Anand Basu)