The rupee slipped to a low of 47.07 against the dollar on Tuesday its weakest level in just over a month, even as the dollar continues to strengthen against other major currencies.
Dealers attributed some of the weakness to dollar buying by local importers wishing to settle their month-end bills. The dollar has appreciated by 2.55% against the euro over the past month and by1.9% against the pound in the same time.
Manish Sarraf, head of treasury at Dhanlaxmi Bank said, ?We will continue to see some pressure on the rupee with the dollar gaining against other currencies such as the euro and foreign inflows into the Indian economy somewhat slower. We expect the rupee to hit 47.20 in the next one week and should that happens, the currency may even test a level of 47.50.?
According to Bloomberg data, the Indian currency has declined by 1.4% this month and 0.3% since last Thursday. The rupee has lost 1.2% this year, the worst performance among Asia?s most-actively traded currencies with the exception of the South Korean won.
Observes Moses Harding,Head,Global Markets, Indusind Bank, ?We expect the rupee to trade in the range of 46.50-47 against the dollar for the near term.
The fundamentals being mixed, rupee moves will be guided by moves in the movement in euro/dollar and inflows into domestic stock market. Foreign Institutional Investors (FIIs) have bought equities worth $2.3 billion in the month of August while in the week to August 30, 2010, they picked up stocks worth $400 million.
While there is clarity on consolidation in stock market, with the Sensex at 17850-18350, the direction of euro/dollar is not clear in the near term.?
Mecklai Financial CEO Jamal Mecklai had indicated some time back that a range of 45.50 to 50 over the next six months was likely since global risk appetite was still low and inflows relatively modest.
?The fact that our monthly trade deficit is very high suggests that there could be continuing pressure on the rupee,? Mecklai had observed.
The country?s trade deficit in the four months through July was $43.6 billion, compared with $31.7 billion in the year-earlier period.