Mumbai: The rupee tumbled 1% on Friday, hit by dollar demand from oil importers and a slide in local equities, with sentiment remaining cautious as world markets await with bated breath the outcome of a key euro zone summit later in the day.
At 11:56am, the partially convertible rupee was at 52.22/23 per dollar, sharply weaker from its 51.75/76 close on Thursday, after dipping to 52.31 in early trades -- a level not seen since 30 November.
Most traders expect the rupee in the 52.10-52.40 range in the day.
“Oil bidding is there and equities too have been hit by domestic growth concerns,” said Vikas Chittiprolu, a senior foreign exchange dealer with Andhra Bank.
India imports more than three-fourth of its oil requirements and local refiners are the biggest purchasers of dollars in the domestic currency market.
“Market may also prefer to stay long dollars before the EU summit, because if the steps announced don’t comfort the market, dollar demand could rise sharply,” Chittiprolu said.
The euro clawed back losses on Friday after dipping close to a recent one-week low as hopes dimmed that a European Union summit would make substantial progress toward containing the region’s sovereign debt crisis.
For comments of key figures at the EU summit, see
“We are in a risk-off mood and the rupee could slowly move towards the 53-mark in coming sessions in case the already bleak global economic outlook worsens. Then, the only solace could be action from the regulators to help the currency,” said a senior foreign exchange dealer at a large private bank.
The Reserve Bank of India (RBI) Governor Duvvuri Subbarao on Thursday had said rupee was always on the RBI’s radar and the central bank will intervene only to manage volatility.
However, on Wednesday, Subir Gokarn, a deputy governor at the RBI, had said the bank does not want the current fall in the rupee to spiral out of control. and
The rupee had hit a record low of 52.73 on 22 November and has shed more than 14% of its value this year to remain the worst performer among major Asian peers.
The one-month offshore non-deliverable forward contracts were quoted at 52.64, below the onshore spot rate and indicating a bearish near-term outlook.
The one-month onshore forward dollar premium was at 29.75 points from 28.50 points on Thursday, the three-month was at 74.5 points from 73, and the one-year premium was at 213 points from 211.50.
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 all at 52.42. The total volume was at $1.89 billion.