MUMBAI: Belying expectations, the rupee on Tuesday tumbled by 32 paise to six-week low at 40.48/49 against the greenback on heavy dollar demand from oil refiners as well as hectic forward coverings by investors amid the dollar gaining strength against rival currencies.
At the interbank foreign exchange market, the rupee continuously moved downwards after resuming steady at 40.15/16 against its last close of 40.16/17 a dollar.
The benchmark six-month forward dollar premiums payable in October ended at 45.50-47.50 paise, down from 54-56 paise on Monday and the far-forward maturing in April dipped to 75.50-77.50 paise from 88-90 paise previously.
The huge fall in the local currency coincides with the central bank’s decision to raise the Cash Reserve Ratio (CRR) by another 0.25 per cent which is expected to drain liquidity system by Rs. 9,000 crore and lead to strengthening of the local currency.
Experts said the rupee’s tumbling could baffle the apex bank which on April 17 announced a hike in CRR by 0.50 per cent in two tranches, effective from April 26 and May 10, to 8 per cent in a bid to control rising inflation. It is believed that a strong rupee helps bring down the inflation. Forex dealers said the RBI would ideally like the rupee to trade in the range of 39 against the dollar to help it fight high inflation. — PTI