On Thursday, the rupee fell back towards a 15-month low, as a stock market sell-off and record oil prices weighed, but traders said it found support as state banks sold an estimated $600 million to $700 million.
It ended at 43.30/31 per dollar, 0.3% weaker than Wednesday’s close of 43.17/18. It had hit a 15-month low of 43.50 on Tuesday.
The rupee has fallen 1% so far this week, taking its losses against the dollar to more than 9% so far in 2008.
“There was some dollar buying in the offshore markets and with the outflows continuing in the stock market, the next resistance for the dollar/rupee is 43.45 and if that breaks, then it may head to 44,” said Rohan Lasrado, a currency dealer at HDFC Bank.
One-month offshore non-deliverables forwards contracts were at 43.75/85, weaker than the onshore rate.
Indian shares fell 4.2% on Thursday, taking their losses to 15% in two weeks, as record oil prices above $145 a barrel intensified inflation expectations and possibly tighter monetary policy.
Foreigners have sold $6.6 billion worth of stocks so far this year after buying a net $17.4 billion last year.
“Oil will continue to be the key driving factor for the rupee and if it continues to rise further, then the rupee is set to weaken further,” said Lasrado.
India’s oil import bill is expected to hit $110-$120 billion in 2008/09, from $77 billion in the previous fiscal year due to higher world prices, petroleum secretary MS Srinivasan said.
Meanwhile, bond prices fell as record high oil prices raised expectations of spiralling inflation in the coming weeks, which may prompt more monetary measures.
Volumes traded on the bond market were as low as Rs 190 crore.
The yield on the 10-year benchmark paper, 2018, ended at 8.8081% yield-to-maturity, as against 8.7800% yield on Wednesday.
The central bank will auction Rs 6,000 crore of 8.25%, 2018 paper and Rs 4,000 crore of 8.28%, 2032 gilt on Friday, which is expected to put even more pressure on bond yields.
Call money rate ended sharply down on Thursday after demand faded as liquidity continued to improve, said dealers.
The one-day call rate ended at 5.00-5.50% compared with 7.00-7.50% Wednesday.
Reserve Bank of India absorbed Rs 13,300 crore through its reverse repo tender on Thursday, compared with Rs 600 crore on Wednesday.
