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Rupee hits 2-week low, importer dollar demand weighs

Rupee hits 2-week low, importer dollar demand weighs
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First Published: Wed, Jan 05 2011. 07 06 PM IST
Updated: Wed, Jan 05 2011. 07 06 PM IST
Mumbai: The rupee declined for the second day to end at two-week lows on Wednesday on persistent importer dollar demand, weak shares and broad dollar strength.
The partially convertible rupee ended at 45.33/34 per dollar, after hitting 45.33, its weakest since 21 December and below its close of 44.98/99 on Tuesday. Dealers expect the rupee to move in 44.90-45.50 band rest of the week.
“Rupee may move with a weakening bias rest of this week on lack of fresh dollar supply due to weak shares, strong importer dollar demand and broad dollar strength, with the dollar index rising since last three sessions,” said Rohan Naik, head of forex trading at Standard Chartered Bank.
Oil importers stepped up their purchase of the US unit on concerns of any possible supply disruption from Iran amid a payment dispute between India and the Islamic Republic, dealers said.
“Some oil companies like MRPL were probably covering on the Iran news,” said a dealer.
India’s Mangalore Refinery and Petrochemicals Ltd (MRPL) on Wednesday issued its fourth crude oil import tender this week.
Iran has offered a stop-gap plan for oil supplies to India for January after India’s central bank said last week payments to Iran could no longer be done through a longstanding clearinghouse system run by central banks, prompting fears India’s $12 billion annual oil imports from Iran could be threatened.
“Oil importers were buying (dollars) at around 45.15 levels,” Standard Chartered’s Naik said.
Dealers will also closely watch foreign institutional investment trend, which is key to the rupee’s direction.
“It is too early to understand the trend for this month, but the reality is there is lack of (dollar) supply on top of oil importers’ (dollar) demand,” said a foreign bank dealer.
Indian shares declined for the second day, closing nearly 1% lower, with financials leading the fall.
Foreign investors bought a record net $29.3 billion worth of shares in 2010, compared with the $17.5 billion net inflow in 2009. In the first two trading sessions of 2011, foreign funds bought $269.5 million of shares.
The dollar held firm on Wednesday, bolstered by further evidence that the US economic recovery is becoming self-sustaining, though its gains against the euro were slowed by central bank demand for the single currency.
The index of the dollar against six major currencies was up 0.47% at 79.817 points at local market close.
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First Published: Wed, Jan 05 2011. 07 06 PM IST
More Topics: Markets | Rupee | Currency | Foreign Exchange | Dollar |