Mumbai: The rupee fell on Monday, tailing weak domestic equities and Asian currencies, but rupee demand from corporates for advance tax payments is likely to prevent a sharp drop.
At 10:43 am, the partially convertible rupee was at 44.84/85 per dollar, 0.3% weaker than Friday’s close of 44.72/73.
“Corporates may not be looking to hold dollars before the tax payments are made. So, this should create support for the rupee around 44.90,” said a dealer with a foreign bank.
The rupee has moved in very thin band of 44.8350-44.8900 so far in the day, and most traders expect it to stay in a 44.77-44.95 range for the rest of trade.
“Rupee could risk weakening beyond 44.95 if equities move further down,” said a dealer with another foreign bank.
The benchmark share index fell as much as 0.8% with lenders leading the losses, amid weak Asian markets.
Indian companies will pay their advance taxes for April-June by Wednesday. The outflow from the banking system is expected to be roughly around Rs300-400 billion ($6.7 billion-$8.9 billion) and is likely to return in the form of government spending in coming weeks.
Traders said an underlying bearish view on the euro may also hurt the rupee.
The common European unit was up against the dollar on Monday, bouncing back from an early drop as traders expected a bout of short-covering to give the single currency only a temporary reprieve.
The euro was at $1.4339, versus $1.4466 at close of local forex trade on Friday, while the index of the dollar against six major currencies was up 0.10% at 74.875 points.
The one-month onshore forward premium was at 23.75 points versus 25 points on Friday.
The three-month was at 74.75 points from 76.50 points and the one-year was at 259 points versus 264.25 points.
One-month offshore non-deliverable forward contracts were quoted at 45.07, 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 on the United Stock Exchange were all at 44.9700, with the total volume at $1.16 billion.