Ahead of the RBI’s quarterly monetary policy review, the rupee on Monday snapped three days of gains and closed 37 paise lower, the most in a week, to 59.41 against the dollar.
The currency also declined amid fresh month—end dollar demand from importers and a drop in local stocks. A weak dollar overseas ahead of the US Federal Open Market Committee meet this week and fresh capital inflows restricted the rupee’s fall, a forex dealer said.
At the Interbank Foreign Exchange Market, the rupee opened lower at 59.10 a dollar from the previous close of 59.04. After touching a high of 59.08, it declined to a low of 59.45 and settled at 59.41, a fall of 37 paise or 0.63 per cent. The rupee last fell by 37 on July 22.
The rupee had gained 72 paise, or 1.2 per cent, in the past three sessions.
The benchmark S&P Sensex on Monday dropped 0.78 per cent.
Foreign institutional investors injected Rs 278.04 crore on Friday, while they pulled out Rs 231.77 crore today, as per provisional data with the stock exchanges.
“Weakness in the rupee was mostly attributed to cautiousness ahead of the RBI monetary policy tomorrow,” said Abhishek Goenka, founder and CEO of India Forex Advisors. “The negative closing in the stock markets and outflows to the tune of USD 250 million related to dividend payments by ITC also contributed to the losses in the rupee.”
A survey of external professional forecasters showed the median expectation on the rupee’s value at 59.5 to the dollar by March 2014, the RBI said in its macroeconomic and monetary developments review released on the eve of the policy announcement.
In the global market, the dollar fell 0.14 per cent against a basket of six major units, extending last week’s losses, ahead of a monetary—policy decision from the Federal Reserve and key U.S. monthly jobs data due later this week.
Pramit Brahmbhaat, CEO, Alpari Financial Services, (India) said: “Looking at the current scenario, fundamentally rupee is expected to trade over 60 levels as constant measures taken by the regulators are not helping it much. The trading range for the Spot USD/INR pair is expected to be within 59.10 to 59.80.”
Forward dollar premiums remained weak on continued receipts by importers.
The benchmark six—month forward dollar premium payable in December eased to 222—226 paise from last close of 224—229 paise. Far—forward contracts maturing in June also softened to 439—444 paise from 440—445 paise.
The RBI fixed the reference rate for the dollar at 59.2970 and for the euro at 78.7129.
The rupee dipped further to 91.34 against the pound sterling from last Friday’s close of 90.98 and also declined to 78.87 per euro from 78.36.
It continued its downslide against the Japanese yen to end at 60.75 per 100 yen from 59.88.