Rupee slips as euro sheds weight

The rupee lost 22 paise on Monday by closing almost at a month's low of 44.12/14 to a dollar against last week's close of 43. 92 to a dollar.

According to foreign exchange dealers, the bearish sentiment in the spot rupee was triggered by sharp depreciation of euro globally which fell to 1.2020 to a dollar as against a close of 1.2010 last week.

The dealers expect the spot rupee to touch 45 to a dollar in the medium term period of four-five months. In the domestic foreign exchange market, most banks started buying dollars following a high trade deficit data released by the RBI last week.

Quantum of foreign institutional inflows (FIIs) has also taken a beating, added the dealers. Trade deficit for the first quarter 2005-06 rose three-fold to $15.8 billion, as against $5 billion a year earlier. The market has turned into a net buyer of dollars, as against a seller a few weeks back.

The spot rupee had, a month ago, touched similar levels of 44.15/16 owing to heavy arbitrage between Indian foreign exchange market and non-deliverable forward market.

Tracking the spot rupee, the forward premiums closed marginally higher with six-month and one-year annualised premiums at 0.86 per cent and 0.76 per cent respectively as against closing of 0.73 per cent and 0.70 per cent, respectively, last week.

The government securities market remained lacklustre with trading restricted to 10.25 per cent 2021 paper. The government announced auction of 7.40 per cent 2035 and 11.83 per cent 2014 to raise Rs 2,000 crore and Rs 6,000 crore, respectively, to be held on October 6.