After a day’s respite, rupee on Thursday continued its downward spiral and closed 19 paise lower at 57.98 against the dollar on weak stocks and disappointment over lack of concrete measures in Finance Minister P Chidambaram’s reform talk.
Fresh dollar demand from importers and some banks also weighed on the rupee while weak dollar overseas forced some exporters to offload the US currency, dealers said.
At the Interbank Foreign Exchange (Forex) market, rupee resumed sharply lower at 58.10 a dollar from previous close of 57.79. It dropped further to a low of 58.56 after hopes of major steps like NRI bond issuance by the government were not announced by Mr. Chidambaram in the press conference in New Delhi.
While dollar demand from importers weighed, the rupee bounced back on dollar selling by exporters on hopes of further fall in the dollar value in global markets. Rupee touched a high of 57.94 before settling at 57.98, showing a fall of 19 paise or 0.33 per cent. On Wednesday, it had gained 60 paise, snapping a five-day losing run.
“The rupee was seen depreciating during the Finance Minister’s speech in which he did not announce any concrete measure that the investors were hoping for,” said Abhishek Goenka, Founder & CEO, India Forex Advisors.
The dollar index, which tracks the performance of the US unit against a basket of six major rivals, traded negatively and traded at three-month lows. Selling of dollars by exporters helped the rupee pare early losses, according to Ashtosh Raina, Head of Foreign Exchange Trading, HDFC Bank.
Meanwhile, the Indian benchmark S&P BSE Sensex on Thursday tumbled by 214 points amid FIIs pulling out over Rs 550 crore from stock markets, as per provisional data with bourses.
“Rupee can appreciate. Government has indicated some steps and am sure the RBI will do its share to stem the slide,” said Srinivasa Raghavan, EVP (Treasury), Dhanlaxmi Bank.
On Wednesday, government hiked the G-Sec limit for foreign investments by $ 5 billion. RBI has recently taken steps like hiking cap for online repatriation of export proceeds.
In a bid to accelerate the process of economic reforms and spur investment, government will soon decide on coal and gas pricing and review FDI cap in various sectors including defence, Mr. Chidambaram said today.
A day after rating agency Fitch revised credit outlook for India from negative to stable, he addressed a press conference to say that government will also give a push to 30-40 of the 250 private sector projects that can quickly take off the ground in yet another attempt to boost growth.
With rupee taking a knock on account of high current account deficit, Mr. Chidambaram said while he shared the concern, there was no need to panic. He hoped authorities will take measures to ensure that there is no volatility.
“Disappointment over steps like NRI bond issuance is going to be short-lived as markets would seen realise that Indian government cannot take such a step at a time emerging markets are seeing a sell-off in debt,” said Mohan Shenoi, President - Group Treasury & Global Markets, Kotak Mahindra Bank.
Experts said the rupee’s recent fall has not been in isolation. “A glance at other major emerging economies shows that there has been an across the board fall in emerging currencies since early May...countries having current account deficits have seen relatively larger depreciation,” said AXIS Mutual Fund, Head fixed Income group, R Sivakumar.
However, Pramit Brahmbhatt, Alpari Financial Services feels that next resistance for rupee is set at 58.60. “If it is breached then 59.20 will be next level to watch,” he said.
Meanwhile, premium for forward dollar ended sharply down on fresh receipts by exporters. Benchmark six-month forward dollar premium payable in November dropped to 152-1/2-154 paise from Wednesday’s close of 158-160 paise. Far-forward contracts maturing in May dipped to 305-307 paise from 313-315 paise.
The RBI fixed the reference rate for the US dollar at 58.4140 and for the euro at 78.1193.
Rupee fell back against the pound sterling to 90.85 from previous close of 90.44 and also turned negative to settle against the euro at 77.26 from 76.69. It too reacted downwards sharply against the Japanese yen to 61.60 per 100 yen from last close of 59.82.