Rupee drops as importers seek dollars

Rupee drops as importers seek dollars
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First Published: Tue, Aug 25 2009. 05 56 PM IST
Updated: Tue, Aug 25 2009. 05 56 PM IST
Mumbai: The rupee weakened on Tuesday as a choppy sharemarket failed to provide clarity on the direction of foreign fund flows and month-end dollar demand from importers gained momentum. The partially convertible rupee closed at Rs48.75/76 per dollar, off an early low of Rs48.85 but still 0.3% below its previous close of Rs48.62/63.
“There was only buying today. Even when Sensex was up 400 points yesterday, the dollar-rupee was bid. Today equities were negative for large part of the day, so one can imagine,” said Madhusudan Somani, head of foreign exchange trading at Yes Bank.
“There was decent demand from oil companies, along with some month-end demand as well, keeping it bid. Lack of inflows completely skews the demand-supply picture, so the downside for the dollar-rupee is limited,” he added.
Oil is India’s biggest import and refiners are the largest buyers of dollars in the local currency market. Demand for dollars tends to peak at the end of each month, when importers make payments.
India shares edged up 0.4% to their best close in almost three weeks, recovering from losses of as much as 1.3%. Foreign fund investments into local shares are a key driver for the local currency.
Foreign investors have bought a net $7.6 billion worth of local shares so far in 2009, after having sold more than a net $13 billion last year.
“Dollar-rupee is expected to be biddish till we get over with the month end. 49.10 looks like a good resistance in the near term,” Somani said.
One-month offshore non-deliverable forward contracts were quoting at 48.80/90.
In the currency futures market, the most traded near-month contract on the National Stock Exchange and MCX-SX closed at 48.7775 and 48.7850 respectively, with the total traded volume on the two exchanges at a high $2.2 billion.
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First Published: Tue, Aug 25 2009. 05 56 PM IST