Mumbai: The rupee fell on Thursday, snapping a three-day gain, on speculation the Reserve Bank of India (RBI) sold the currency after it reached the highest in more than a week.
RBI may be selling rupees after a government report on Thursday said exports will decline in the next fiscal year that starts 1 April. The central bank bought foreign exchange for a 14th month through December as the rupee completed its biggest annual advance in 34 years. A stronger rupee makes goods and services more expensive to customers abroad.
“I think the central bank will be concerned with what is being forecasted widely about exports,” said Ravindra Babu, a currency trader at state-owned Andhra Bank in Mumbai. “I am expecting the dollar to get supported in the near term.”
The rupee dropped 0.1% to 39.84 per dollar in Mumbai, according to data compiled by Bloomberg. It may fall to 39.85 this week, Babu said.
Prime Minister Manmohan Singh’s government needs higher earnings from exports to help eradicate poverty in a country where more than half of the 1.1 billion people live on less than $2 (Rs79.60) a day.
Export growth slowed to a six-month low in December as record gains in the currency last year pushed up the price of goods overseas. Shipments of manufactured goods increased 16% to $12.3 billion in December from a year earlier, slower than November’s 27% gain, the government said on 1 February. “The outlook for exports in the year to March 2009 may not be as bright as in the past years with the exchange rate development,” the annual Economic Survey prepared by officials advising finance minister P. Chidambaram said. India needs to monitor the fall in textiles and business services export growth, it said. The rupee rose earlier on speculation stocks will attract overseas funds as cuts in US interest rates boost demand for non-dollar assets.