Rupee drops 22 paise on dollar demand

By: | Published: January 28, 2016 12:56 AM

The rupee dropped to the lowest level in intraday trade in almost a week on speculation oil importers stepped up dollar purchases to pay bills as the end of the month approaches.

The rupee dropped to the lowest level in intraday trade in almost a week on speculation oil importers stepped up dollar purchases to pay bills as the end of the month approaches.

The currency fell 0.3% to close at 68.05 to the dollar on Wednesday—a new closing low since August 28, 2013 when it hit 68.82 to the dollar. In recent times, the currency had touched a closing level of 68.02 on January 21 .

The rupee declined to 68.08 in Wednesday’s trade, the weakest since Jan. 21, and has slumped 2.8% this month in Asia’s worst performance.

The Federal Reserve ends its first policy meeting of the year on Wednesday and investors will be scouring its statement for hints the monetary authority is backing away from the path of four potential interest-rate increases this year due to the turbulence in global markets. India sovereign notes gained even as a sale of treasury bills fell short of target for a second time this month, signaling investors may have demanded higher yields amid a cash crunch.

“There is a negative bias as month-end dollar demand from oil importers and the Fed meeting are weighing on the rupee,” said Gaurav Sharma, a senior currency analyst at Religare Commodities. “Traders will focus on the commentary to ascertain if there is any shift in stance in light of slowing growth in China and the crash in oil prices.”

RBI rejected all bids for 91-day notes at a Wednesday sale that aimed to raise R9,000 crore, according to a central bank statement. It sold R6,000 crore of 182-day notes as planned. A Jan. 6 auction was the first since May to fall short of the government’s goal.

The cash squeeze is worsening as global investors pulled $1.7 billion from Indian stocks this month.

(With inputs from Bloomberg)

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