November 15, 2011 / 3:13 AM / 8 years ago

Rupee hits 32-month low; further downside expected

MUMBAI (Reuters) - The rupee ended near the 32-month low touched early on Tuesday as sharp losses in domestic shares, a weak euro and dollar demand from corporates and oil refiners weighed.

A man deposits his money in a bank in Amritsar April 19, 2010. REUTERS/Yasir Iqbal/Files

The partially convertible rupee closed at 50.66/67 per dollar, 0.7 percent below its Monday’s close of 50.285/295. Earlier in the day, it hit 50.76, its weakest since March 31, 2009.

The rupee is already the worst-performing Asian currency, weakening by more than 13 percent from its strongest point in late July. It is down nearly 12 percent so far in the calendar year.

“The rupee has depreciated on expected lines. I am now looking at 51.35, which if broken can pave the way for 52.18,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

“Trade deficit, fiscal issues are all weighing on the rupee. Exporters seem to have run out of dollars to sell, so there is nothing holding back the rupee from falling,” he added.

Macquarie downgraded its forecast on India’s growth for the year to March 2013 by 1 percentage point to 6.9 percent due to a lack of policy reforms and the lagged impact of monetary tightening.

Traders said the euro’s fall along with losses in domestic shares which raised concerns of more foreign fund outflows weighed.

The euro fell on Tuesday, coming close to recent lows versus the dollar and hitting a one-month low against the yen as rises in euro zone bond yields underscored the difficulties facing policymakers in containing the region’s debt crisis.

The euro was trading at $1.3515 at the end of domestic rupee trade, while the index of the dollar against six major currencies was up 0.55 percent at 77.995 points.

Reuters FX analyst Krishna Kumar said the market would ultimately be target ting the rupee heading towards the all-time low of 52.2, while 49.9, which was the low in September, would now be a pivotal resistance.

The Sensex skidded 1.4 percent to its lowest close in more than three weeks on Tuesday, extending a slide into a fourth session, as sluggish corporate earnings and stubbornly high inflation dented investor confidence.

“Heard some dollar buying from corporates today, oil firms were also in the market. If 50.75 breaks, next level is at 51.47 technically,” said A. Ajith Kumar, a senior foreign exchange dealer with Federal Bank.

Oil is India’s biggest import and refiners are the largest buyers of dollars in the local currency market.

“Exporters have been coming in at times to sell dollars, but now I think they are also waiting for higher levels. Moreover most of their positions might have got covered at even lower levels,” Kumar said.

The one-month onshore forward premium was at 30.75 points from 27.50 on Monday, the three-month was at 73.75 points from 68.50 and the one-year was at 188.75 points from 172.75.

“The sharp fall in the spot rupee, led to paying in forwards as well. The one-year premium could rise past 200 points this week, if rupee continues to fall,” a senior dealer with a foreign bank said.

One-month offshore non-deliverable forward contracts were quoted at 51.05, weaker than the onshore spot rate, suggesting a bearish near-term outlook.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange closed at 50.8225, while those on the United Stock Exchange and the MCX-SX ended at 50.82. The total volume was nearly half the usual at $5.34 billion.

Editing by Aradhana Aravindan

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