Tracking weak stock markets, rupee on Wednesday closed below the 53-level against the dollar, first time in nearly two weeks, amid S&P threatening to downgrade India’s sovereign credit rating to junk grade within 2 years.
After breaching the 53 mark in early trade, the rupee closed lower for the fourth straight day as it dropped 33 paise to 53.05 compared to previous close of 52.72.
At the Interbank Foreign Exchange (Forex) market, the local unit opened lower at 52.95 a dollar but showed some strength to recover to log a high of 52.85.
However, it soon fell back on persistent dollar demand and weak domestic stocks to a low of 53.18. The rupee concluded at 53.05, showing a fall of 33 paise or 0.62 per cent.
Dealers said a firm dollar overseas put pressure on the rupee even as continued capital inflows failed to cap the rupee’s recent fall.
“IMF has already downgraded the growth outlook and S&P has issued a fresh warning on India’s credit rating. Over the near-term, we believe rupee could remain a play on the global factors and as a result, a range of 52.20-53.60 could unfold,” said Anindya Banerjee, Currency Analyst, Kotak Securities.
The rupee had last closed above 53-level on September 27 but strengthened to 51-level. In the last four sessions, the rupee has fallen 133 paise or 3.5 per cent.
Like in the recent days, the dollar index was up by 0.10 per cent against a basket of six major global rivals to trade back over the 80 mark for the first time in a month.
Dealers said investors are once again showing a preference for so-called ‘safe-haven assets’ like dollar amid fresh worries over global growth and EU debt crisis. New York crude oil was trading above USD 92 a barrel in Europe on Wednesday.
Meanwhile, the Indian stock market benchmark Sensex on Wednesday plunged by 162.26 points or 0.86 per cent after S&P’s threat.
“The weakness in rupee was largely on account of dollar index moving above 80 levels. The Euro continued to drift lower on its weak Economy outlook. The comments by S&P regarding India still faced a one-in-three chance of a credit rating downgrade over the next 24 months, also added to the rupee weakness,” said Abhishek Goenka, Founder & CEO, India Forex Advisors.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, “The S&P sovereign downgrade warnings and the weak EU macro economic factors weighed on rupee extending its weakness for fourth straight session.” The premium for the forward dollar dropped further on sustained receipts by exporters.
The benchmark six-month forward dollar premium payable in March finished weak at 152-1/2—154-1/2 paise from overnight closing level of 157-159 paise.
The premium for far-forward contracts maturing in September also dipped to 295-297 paise from 302-304 paise.
The RBI has fixed the reference rate for the US dollar at 53.0445 and for Euro at 68.2100.
The rupee continued to rule weak for last few days against the pound sterling to 84.91 from Tuesday’s close of 84.50 and also eased further to 68.30 per Euro from 68.22.
It declined against the Japanese yen to 67.75 per 100 yen from last close of 67.39.