Rupee ends off 32-month low; outlook bearish

Rupee ends off 32-month low; outlook bearish

Mumbai: The rupee ended off a near 32-month low on Wednesday, aided by some recovery in the euro and exporters selling dollars in the local market, even as the underlying mood remained negative due to uncertainty in the euro zone.

The partially convertible rupee ended at 50.7350/7450 per dollar, 0.15 weaker than its close of 50.66/67, but stronger than the low of 50.96 hit in early trades, its weakest since 31 March, 2009.

The euro clawed back from one-month lows against the dollar and yen after the European Central Bank was seen defending Italian and Spanish debt from a renewed market sell-off.

“There was good selling seen from exporters today. The dollar premiums have also come off tracking the same. The euro’s recovery in late trade, helped the rupee retreat," said Vikas Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.

The euro was at $1.3467 around the close of the local market, higher than the day’s low of $1.3430, while the index of the dollar against six major currencies was at 78.222 points from 77.995 points previously.

Some traders said the cabinet approval of foreign direct investment of up to 26% in the pension sector improved the foreign fund inflow outlook and helped the local unit.

Foreign funds sold $74.59 million of stocks on Nov. 15, after being net buyers of $43.10 million in the previous session.

However, volatile local shares weighed. Shares fell for a fifth straight session to their lowest close in four weeks, as investors chipped away at gains at the end of a weak earnings season that reflected slowing domestic growth amid a gloomy global economic backdrop.

“Rupee volatility is being driven by demand supply. The dollar is tight even in the international market," said N.S. Venkatesh, treasurer at IDBI Bank.

“Europe is in trouble and there is a view that if euro goes to $1.31, it will have a major impact on rupee and push it towards the 52 per dollar mark," he said.

On the domestic front, widening current account deficit could weigh on the rupee, he said.

The one-month onshore forward premium was at 30.25 points from 30.75 on Tuesday, the three-month was at 74.50 points from 73.75 and the one-year was at 183.75 points from 188.75.

The one-month offshore non-deliverable forward contracts were quoted at 51.08, 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 MCX-SX and the United Stock Exchange were all at 50.8750, with the total volume at $4.76 billion.