The rupee today closed at a new low of 47.25/2550 against the dollar, losing as much as seven paise over Thursday's close. With this, the currency has lost around 12 paise (0.25 per cent) during the week.
It also touched an all-time intra-day low of 47.2650 today. Its earlier intra-day low of 47.21 was on July 3.
The weakening of the rupee also pulled down government security prices by 30-40 paise at the long end. The yield of 10-year government paper went up from 9.14 per cent to 9.17 per cent.
Even though there was no panic in the market, analysts are expecting the rupee to go down further on the back of dismal performance in the trade front coupled with poor inflow of foreign funds. Public sector banks led by State Bank of India sold dollars at the 47.2650 level to arrest the fall today.
Foreign funds are said to have pulled out $31.4 million between September 3 and September 5, spooking the markets. As it is, foreign portfolio inflows during August 2001 at $83 million were the lowest in any month in 2001. The net foreign portfolio investments till August in the current calendar year, however, amounts to $2.67 billion higher than $1.56 billion for the whole of 2000.
Sanjit Singh, fixed income analyst, ICICI Securities and Finance said "The immediate cause of the fall in rupee was the poor foreign institutional inflow. However, the poor outlook on trade balance based on the performance thus far also played its part."
In the current fiscal year till July, exports fell by 1.9 per cent compared to a rise of 27.5 per cent during the corresponding period of the last fiscal. Imports fell by 1.8 per cent during April-July 2001, and analysts said a sharper decline was expected. Singh expects the currency to touch 48 against dollar by the end of this current financial year. JP Morgan Securitiies India Pvt Ltd in its latest report 'Indian Markets Outlook and Strategy' also expects the rupee to end the current month around 47.40 mark.
Siddharth Mathur, research head, JP Morgan Securities India said: "Recently there has been optimism about the turnaround of the global economy given the performance of United States and Europe. However, the growth estimates continued to be lower which has triggered the foreign portfolio investors to take out their money from the market."
Recently, economists from the International Monetary Fund (IMF) lowered their forecasts for growth of gross domestic product in 2001 to 4.5 percent from an earlier estimate of 5.6 percent and to 5.7 percent next year from 6.1. The two major international rating agencies -- Standard & Poor's and Moodys Investors Service-- have already downgraded their ratings outlook on India citing concern over low pace of reform and high budget deficits.
