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Rupee hits near 3-month low; retreats as euro pares losses

Rupee hits near 3-month low; retreats as euro pares losses
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First Published: Wed, May 25 2011. 05 50 PM IST
Updated: Wed, May 25 2011. 05 50 PM IST
Mumbai: The rupee ended off a near three-month low on Wednesday as the euro pared losses against the dollar, but traders expect the local unit to weaken further on Thursday due to high demand for the greenback from importers and a volatile euro.
The partially convertible rupee closed at Rs 45.3475/3550 per dollar, after falling to Rs 45.4275, its lowest since 25 February, when it had touched 45.43. On Tuesday it had closed at 45.21/22.
“The rupee is looking to weaken further. Importers are panicking and lack of supply from exporters or from foreign funds will keep it weak,” said Vikas Chittiprolu, a senior forex dealer with Andhra Bank.
He sees the rupee in a range of 45.20-45.50 per dollar on Thursday.
Domestic oil refiners are the biggest purchasers of dollars in the local forex market, with oil being India’s biggest import item.
The euro fell on Wednesday, as investors including hedge funds cut bullish bets on mounting worries over Greece’s finances, but pared losses later in the day after Finland’s parliament approved Portugal’s bailout package. Traders said mounting worries over Greece’s finances would check gains and keep the currency volatile.
The euro was at $1.4071 when the local markets closed, after falling to $1.4013 earlier in the day.
The index of the dollar against six major currencies was up 0.14% at 75.986. On Tuesday, when the local market closed the euro had been at $1.4078 and the dollar index at 75.999 points.
Negative local shares also weighed on the rupee, dealers said.
Indian shares ended 0.9% lower on lacklustre volumes, tracking weaker global markets as fears over Europe’s widening debt crisis weighed on sentiments.
Foreign funds have sold Indian shares worth $1.7 billion so far in May pressured by a sharper-than-expected 50 basis point rate hike by India’s central bank early in the month.
The one-month onshore forward premium was at 21.50 points versus 21.25 last close. The three-month was at 69.75 points against its previous 65.00 and the one-year was at 256.75 points against 248.25.
The one-month offshore non-deliverable forward contracts were quoted at 45.53, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were at 45.3475, 45.3600 and 45.3500 respectively, with the total volume at $10.56 billion.
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First Published: Wed, May 25 2011. 05 50 PM IST
More Topics: Markets | India | Rupee | Currency | Foreign Exchange |