Mumbai: The Indian rupee fell for a second successive session on Wednesday to near a record low, as oil importers ramped up demand for the greenback ahead of the end of the month, while global risk assets were hit by worries about Spain.
Though global cues are providing the trigger, traders said the rupee was also being weighed down by deep concerns about India’s fiscal and economic challenges, and doubts about slowing policy reforms.
Traders are looking ahead at gross domestic product data on Thursday, with India expected to say its economy grew at 6.1% in the January-March quarter, the slowest in almost three years.
“Unless the RBI keeps coming in with measures, the rupee will continue to remain under pressure. There are still a huge amount of open importer positions remaining,” said Subramanian Sharma, director at Greenback Forex.
The partially convertible rupee settled at 56.23/24 per dollar, which marked a record closing low, and was not far the all-time low of 56.40 hit on Thursday.
The rupee had closed at 55.67/68 close on Tuesday.
Traders said the central bank had not been spotted intervening, but believe that could change should the rupee fall towards its all-time lows.
The Reserve Bank of India was believed to have intervened in spot and forward markets when the rupee hit seven consecutive record lows over the previous two weeks.
On Wednesday, traders cited strong dollar demand from oil importers looking to meet their commitments at the end of the month.
Global risk aversion also weighed as the euro hit a two-year low on Wednesday, hurt by worries about Spain’s soaring borrowing costs and expectations that more spending may be needed to support its ailing banks.
Local shares also ended in red with the benchmark index down 0.8%.
India’s move to allow foreign retail investors to buy up to $1 billion in local corporate bonds on Tuesday was seen as too mild to significantly bolster capital inflows and support the shaky rupee.
The one-month non-deliverable forward rate was quoted at 56.68, while the three month was at 57.43.
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 all ended around 56.54 on a total volume of $4.9 billion.
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