Rupee hits new 10-week low; dollar demand hurts

Rupee hits new 10-week low; dollar demand hurts

Mumbai: The rupee slid to more than a 10-week low after having traded firm through most of the session on Monday as late losses in the euro and month-end dollar demand from oil refiners and importers weighed.

The partially convertible rupee closed at 45.93/94 per dollar, after touching 45.94, its lowest since 17 September and 0.2% below its 45.84/85 close last Friday.

“The euro crashed in late trade, and along with that, the broad dollar strength versus majors further pushed rupee to fresh lows. A lot of dollar short-covering was triggered by the euro’s fall," said Vikas Chittiprolu, a senior forex dealer with state-run Andhra Bank.

“There was good two-way interest through the day. Exporters came out to sell, but good month-end bids from oil and other importers hurt. I expect the rupee to hold in 45.50-46.10 range this week," Chittiprolu added.

Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market with their demand tending to peak at the end of each month, when they are required to make payments.

The euro fell to two-month lows against the dollar on Monday as investors looked past a rescue package for Ireland to debt problems in other peripheral euro zone economies and sold the currency on any bounce.

The index of the dollar against six major currencies was up 0.4% when the rupee market closed.

Traders said some inflows were also seen towards the Manganese Ore India’s initial share sale, currently under way.

The country’s largest producer of manganese ore has fixed an indicative price band at Rs340 to Rs375 a share for its initial public offering, to raise up to $276 million, which opened last Friday and will close on Wednesday.

Gains in shares, however, prevented a further sharp slide in the rupee, dealers said.

Shares rose for the first time in five sessions and gained 1.4%, tracking world equities, while traders opted for large-cap bets as some of the companies under CBI investigation in the bribes-for-loan scandal fell.

Foreign funds have sold $263.5 million worth of shares in the last two trading sessions until Friday, but are still net investors of a record $28.7 billion in shares so far in 2010, on top of the $17.5 billion purchased last year.