May 22, 2012
The rupee plunged below the psychological 55-level to close at all-time low of 55.04 against the dollar amid robust demand for the US currency from banks and importers, but there was no visible RBI action to shore up the domestic unit from its record low levels.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened slightly lower at 54.45 a dollar from last weekend's close of 54.42 and immediately touched a high of 54.44.
May 22, 2012
The rupee plunged below the psychological 55-level to close at all-time low of 55.04 against the dollar amid robust demand for the US currency from banks and importers, but there was no visible RBI action to shore up the domestic unit from its record low levels.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened slightly lower at 54.45 a dollar from last weekend's close of 54.42 and immediately touched a high of 54.44.
However, it soon started falling and at the fag-end trading breached the crucial 55-level and closed at 55.03, a fall of 61 paise or 1.12 percent from its previous close. Forex dealers said though rupee plunged to record low levels for the third day in a row, RBI was conspicuous by its absence in the forex market. Dealers, however, said RBI could intervene with more policy measures when markets resume tomorrow.
"Rupee breaching Rs 55 is a bit of worry as this has been seen as a strong resistance level. However, we expect the government to come up with some measures, which will help the domestic currency to pull back from the current levels," said N S Venkatesh, Head of Treasury, IDBI Bank. He also said rupee is likely to appreciate tomorrow as additional liquidity from the exporters' Exchange Earner's Foreign Currency (EEFC) accounts will be added to the system.
T S Srinivasan, GM (Treasury) of Indian Overseas Bank said there is a short-term weakness. "Going ahead, the central bank is likely to intervene without which the weakness in the currency is likely to continue," he said.
The depreciating rupee cast its shadow over the Indian benchmark Sensex, which pared its early gains to end with a modest gain of 30.51 points. On Sunday, Finance Minister Pranab Mukherjee had said that the steep fall in the rupee was a matter of great concern and the Centre was trying to resolve the situation.
"It is a matter of great concern. We are watching the situation. The Centre is not (sitting) idle. We are trying to resolve (the issue)," Mukherjee had told reporters in Kolkata. With rupee breaching its previous low, the 55.30-55.50 levels becomes the near term targets, said Pramit Brahmbhatt, CEO, Alpari Financial Services (India).
The declining value of rupee, which has depreciated by over 11 per cent against dollar since March, directly pushes up the cost of crude oil and other imported commodities. "RBI is currently in a state where it can neither support the rupee nor can allow the rupee to depreciate further," said Abhishek Goenka, CEO, India Forex Advisors said.
In the past few weeks, RBI took some measures, including directing exporters to convert 50 per cent of the balance in EEFC accounts into rupees. Hemal Doshi, Chief Currency Strategist, Geojit Comtrade said the recent rupee depreciation was mainly due to structural factors faced by the Indian economy like twin deficits, and high inflation among others. "Also, developments in Europe are also weighing on the doemstic currency," Doshi said.
On the other hand, Sudhir Kumar Jain, GM (Financial Management, IRC, Treasury and ID), Dena Bank said that unless government comes up with some measures to address structural issues faced by the economy along with steps to ramp up capital flows, the domestic currency will witness weakness in the near-term. The rupee premium for the forward dollar improved further on sustained paying pressure from banks and corporates. The benchmark six-month forward dollar premium payable in October settled better at 156-158 paise from last weekend's close of 154-156 paise and far-forward contracts maturing in April also ended higher at 280-282 paise from 272-274 paise.
The RBI fixed the reference rate for the US dollar at 54.6810 and for euro at 69.8556. The rupee, however, fell back sharply to 87.00 against the pound sterling from last Friday's close of 86.04 while dropped further to 70.25 per euro from 69.16. It also tumbled against the Japanese yen to 69.42 per 100 yen from previous close of 68.58.
Courtesy: ET
