Currency closes at 45.53 on high dollar demand from oil firms, importers.
The rupee slid further on Thursday against the dollar as stock markets stayed weak and oil marketing companies and other importers stepped up the purchase of the US currency.
Taking a cue from international developments, the rupee opened at 45.33 against the dollar compared with yesterday’s close of 45.13, before reaching an intraday high of 45.31 at 9.03 am. Dealers said despite a repeated intervention from the Reserve Bank of India (RBI), the Indian currency fell to 45.57 at 3 pm and finally closed at 45.53.
The rupee’s 0.88 per cent drop against the dollar is the steepest single-day decline in nearly three weeks. Since the start of the year, the rupee has fallen 15.45 per cent.
Foreign exchange dealers predict that the Indian currency will drop further to around 46 against the dollar, following a rising demand for the rupee from importers and a continued fall in stock markets. With the Sensex falling almost 30 per cent this year and foreign institutional investors (FIIs) being net sellers to the tune of $7.4 billion this year, there has been a large withdrawal of the greenback.
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RBI’s intervention is expected to have only a limited impact in coming days, dealers said. Even on Thursday, the central bank was active in the spot as well as the forward market as it does not want to constrain liquidity when a large amount is expected to be sucked out of the system next week for advance tax payment.
| BITTER & SWEET Movement against dollar | |||
| Jan 2,’08 | Sep 11,’08 | % change | |
| Pakistani Rupee | 61.32 | 76.51 | -24.77 |
| Korean Won | 936.95 | 1109.20 | -18.38 |
| Thai Baht | 29.75 | 34.78 | -16.91 |
| Indian Rupee | 39.44 | 45.53 | -15.45 |
| Malaysian Ringgit | 3.31 | 3.47 | -4.83 |
| Indonesian Rupiah | 9386.00 | 9440.00 | -0.58 |
| Singapore Dollar | 1.44 | 1.45 | -0.54 |
| Hong Kong Dollar | 7.81 | 7.80 | 0.17 |
| Taiwan Dollar | 32.45 | 32.08 | 1.16 |
| Japanese Yen | 109.66 | 106.58 | 2.81 |
| Source : Bloomberg | |||
“It is only a matter of days when the rupee hits 46 against the dollar. I will not be surprised it if falls further,” said a dealer with a foreign bank.
In the currency futures market on the National Stock Exchange, the 12-month contract showed further weakening, with the contract maturing in August 2009 quoting at 46.70 against the dollar compared with 46.32 yesterday.
The forward premium, however, eased on Thursday with the one-month forward premium at 4.68 per cent compared with 5.02 per cent yesterday. For the six months, it was 2.94 per cent on Thursday, as against 3.32 per cent yesterday. “The trend indicates that the dollar cannot continue to strengthen forever. There is a likelihood of a certain moderation,” said a dealer.
In addition, dealers said RBI’s intervention in the forward market is seen only up to the six-month contract.
In the non-deliverable forward market, which is traded overseas, the one-month forward was at 46.21, indicating that the rupee could be trading at 47.19 against the dollar one year down the line, according to the Bloomberg data.