Indian rupee drops 44 paise to 10-week closing low of 63.10 vs US dollar

Written by PTI | Mumbai | Updated: Jan 28 2014, 02:46am hrs
RupeeThe Indian rupee slipped past the 63-mark against the US dollar for the first time in ten weeks. Reuters
Succumbing to a rout in emerging markets, the Indian rupee slipped past the 63-mark for the first time in ten weeks today and closed 44 paise lower at 63.10 versus the US dollar amid fears that further stimulus tapering by the US central bank will hit capital inflows.

Nervous local stocks ahead of the RBI policy meet, month-end dollar demand from oil refiners and reports of Argentina abandoning support of its peso on the open market, also weighed on the rupee, which slumped for the sixth day in seven.

At the Interbank Foreign Exchange (Forex) market, the rupee commenced the day on a sluggish note at 62.84 a dollar from last Friday's close of 62.66.

Even as the sell-off in other emerging market currencies deepened, the rupee tried to recover and logged a high of 62.65 after the government said there is no need to worry as "economic fundamentals" are very strong.

However, the rise proved to be short-lived as the rupee fell back sharply to a low of 63.32. It concluded at 63.10, a net fall of 44 paise or 0.70 per cent. This is its weakest closing level since 63.11 against dollar on November 14, 2013. In straight three sessions, it has slumped by 129 paise or 2.09 per cent.

"The emerging markets currency sell-off is causing a contagion effect as investors pulled money from emerging markets and other assets viewed as risky, thereby pushing rupee down," said Sugandha Sachdeva of Religare Securities.

In addition to this, the fear that Federal Reserve might go ahead with withdrawing its monetary stimulus by another USD 10 billion added to the pressure, said Abhishek Goenka, CEO, India Forex Advisors.

The dollar index recouped its initial losses and was trading almost stable against a basket of six major rivals ahead of a US report on new-home sales.

Meanwhile, the BSE Sensex today tanked by over 426 points, or 2.02 per cent, to end at a 3-week low of 20,707.45. FIIs pulled out USD 31.45 million on Friday, as per Sebi data.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The rupee continued to depreciate ahead of the central bank's policy review. The trading range for the spot USD/INR pair is expected to be within 62.80 to 63.80."

Forward dollar premiums ended steady to better on stray payments from banks and corporates, said analysts.

The benchmark six-month forward dollar premium payable in June closed at last Friday's level of 213.5-215.5 paise.

Far-forward contracts maturing in December, however, rose further to 459-461 paise from 457-459 paise.

The RBI fixed the reference rate for the dollar at 62.7145 and for the euro at 85.8228.

The rupee declined further to 104.39 against the pound from 103.92 previously. It also remained weak to end at 86.32 per euro from 86.00. The rupee softened to 61.50 per 100 Japanese yen from 61.41.