Rupee hits 6-week low on defence payments

Rupee hits 6-week low on defence payments
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First Published: Tue, Jul 20 2010. 09 42 AM IST
Updated: Tue, Jul 20 2010. 09 42 AM IST
Mumbai: The Indian rupee fell to its lowest level in a month and half on Tuesday, weighed down by defence-related import payments and demand for dollars from some companies.
Firm domestic shares and the dollar’s weakness against major currencies and Asian units should help limit the rupee’s drop, traders said.
At 9:40am, the partially convertible rupee was at Rs47.18/19 per dollar after hitting Rs47.2050, its lowest since 7 June, and weaker than Monday’s close of Rs47.12/13.
“It is the continuation of the much talked about defence demand. Early morning price action indicates demand is broad based -- sundry import cover could kick in if we break Rs47.25,” said R.K. Gurumurthy, head of treasury at ING Vysya Bank.
Traders said Rs47.20 and then Rs47.40 were strong support levels, but if broken, could push the rupee as far as Rs47.75. Good resistance exists at Rs46.70 levels, they said.
“There is a lot of dollar demand seen from local corporates as well, but there are also good offers tracking the sharemarket and other Asians,” a senior dealer with a foreign bank said.
Indian shares rose 0.5% in early trade, with financials leading the rise, taking cues from mostly firm Asian markets.
Foreign fund flows into and out of the sharemarket are a key driver for the rupee. So far in 2010, foreigners have bought shares worth a net $8.6 billion, in addition to last year’s record $17.5 billion inflow.
The one-month offshore non-deliverable forward contracts were quoted at Rs47.40, weaker than the onshore spot rate, suggesting a bearish near-term outlook.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at Rs47.2425, with the total traded volume on the two exchanges at about $560 million.
Most Asian units edged higher versus the dollar.
The dollar eased slightly, inching closer to a two-month low versus the euro hit last week as investors continued to cut long positions on more disappointing US economic data.
The index of the dollar against six majors was slightly negative and would be watched for cues during the day, traders said.
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First Published: Tue, Jul 20 2010. 09 42 AM IST
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