Soaring global crude prices pushed down rupee to an intraday low of 43.20 against the dollar as domestic oil companies rushed for dollar covers. With crude touching a record high of $135 a barrel on Thursday, the rupee opened weaker from its previous close of 42.83 to the dollar at 43.03.
However, subsequent selling of dollars by government banks, probably on behalf of the Reserve Bank of India, arrested the fall and the rupee ended the day at 42.93, dealers said.
The rupee hit a 13-1/2-month low on Thursday and then pulled back. ?While the oil companies and a few foreign banks were the buyers, nationalized banks were largely sellers,? said a dealer at a public sector bank. ?Foreign banks probably were trading,? said a dealer at a bank. The market estimated oil companies? dollar-purchases to be around $500 million. Besides oil companies, a few foreign institutions were also buyers of the US greenback, dealers said. Going forward, the outlook on rupee seems bearish, say dealers.
V Rajagopal, head of currency trading at Kotak Mahindra Bank said, ?High oil prices and muted inflows are dampening the outlook on rupee. Today, possibly there was some RBI intervention, however, it is difficult to say for sure.?
Rajagopal added that depreciation of rupee against the dollar is likely to continue in the short term as foreign institutional investors are pulling out money from stock markets. ?Rupee could touch 43.20-43.50 against the dollar by next week,? he added. ?We feel that rupee may continue to depreciate in the short term unless we see a resumption of capital inflows. We are still confident that India would remain an attractive investment destination in the long run and thus we feel the rupee will appreciate in the long term,? said HSBC in a report released Thursday. FIIs have pulled out $2.7 billion so far in 2008 after pumping in $17.4 billion in 2007.
There is also an expectation that the US data on the house price index and the jobless claim, which is likely to be out later by Thursday eve, to have their bearing on the money market operations for Friday, say dealers.
Meanwhile, the offshore, non-deliverable forward (NDF) market rate also eased, tracking the level in local spot market. The 1-month NDF was quoting at 43.10 per dollar, weaker than the onshore rate, as compared with 43.32 per dollar earlier during the day. On Wednesday, it had ended at 42.82 to the dollar. ?The arbitrage between the onshore and offshore market has continued for a fairly long period and has been responsible for sustained buying demand in onshore markets,? said the HSBC report.
