Rupee drops to 1-yr low on importer dollar demand

Rupee drops to 1-yr low on importer dollar demand

Mumbai: The rupee touched its weakest in a year on Thursday, falling for the fourth straight day, as strong dollar demand from domestic oil firms offset gains in domestic equities and kept the local unit in a tight range.

Reluctance to add big positions before the European Central Bank’s rate decision and a cautious outlook on the region’s economy also weighed, traders said.

After the close of the local forex market, the ECB said it would hold interest rates at 1.5%. Focus will now turn to ECB President Jean-Claude Trichet’s press conference at 1230 GMT.

The partially convertible rupee ended at 46.19/20 to a dollar, 0.04% lower than Wednesday’s close of 46.1670/1750 after dipping to 46.2750 -- a level not seen since 16 September, 2010.

Intraday, the unit had moved in a band of 46.1450-46.2750.

“From what I could make out oil companies were on the (dollar) buying side," said Naveen Raghuvanshi, an associate vice president at Development Credit Bank.

Oil is India’s biggest import item and domestic refiners are the largest purchasers of dollars in the local forex market.

Indian shares overcame a choppy early session and climbed for a third day to their best close in five weeks.

“I’m very keen to know what the ECB has to say about current scenario because the key to stability of the global financial system lies in Europe," said Ashutosh Khajuria, president of treasury at Federal Bank.

The rupee could move to 46.50 levels if the ECB’s economic assessment is gloomy, traders said.

Analysts are worried the euro zone’s debt crisis could trigger a another banking crisis and derail global growth.

The euro was at $1.4040 when the rupee closed, lower from $1.4051 at end of rupee trade on Wednesday, while the index of the dollar against six major currencies was at 75.587 points from 75.554 previously.

The one-month onshore forward premium was at 18.75 points from 12.75 on Wednesday, the three-month at 49.75 points from 39.25 and the one-year at 147 points from 132.

The one-month offshore non-deliverable forward contracts were quoted at 46.43, weaker than the onshore spot rate.

In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the United Stock Exchange both ended at 46.3300, while on the MCX-SX at 46.3350. The total volume was at $5.2 billion.