Currency dips 2.4% on heavy dollar demand from PSU banks.
The rupee posted its biggest single-day fall in more than 12 years on wednesday, hit by rising outflows from the stock markets and heavy dollar demand from public sector banks to meet commercial operations.
The rupee ended 2.4 per cent lower at 49.30/32 per dollar, in line with other Asian currencies. The currency has slid 20 percent this year, heading for its steepest annual loss since 1991.
This was the rupee’s biggest single-day percentage fall since February 5, 1996, when it dived 2.7 per cent.
On October 27, it fell to a record low of 50.29.
Some dealers said the central bank did sell dollars via PSU banks to protect the currency, but added the amount was quite small.
Dealers said the rupee could test 50 per dollar on Friday (all financial markets are closed on Thursday) if the central bank does not step in to protect the currency.
Most Asian currencies like the Korean Won, Indonesian rupiah, and the Thai baht also slipped against the US.
Agencies quoted dealers as saying that a large private petrochemical company is estimated to have bought around $350 million around Rs 48.40-48.80 per $1. A large engineering company is also said to have purchased around $250 million at 48.80-48.90 rupees per $1, dealers said.
Offshore forward contracts show traders have increased bets for how much they predict the rupee will depreciate over the next month, showing an implied rate of 50.03 a dollar compared with 48.72 yesterday.
Forwards are agreements in which assets are bought and sold at current prices for future delivery. Indian rupee forwards traded overseas are non-deliverable, meaning they are settled in dollars rather than the local currency.
Foreign funds continued to repatriate funds, a key factor for the rupee's weakness in recent months. They have so far sold a net $12.7 billion worth of shares after buying a record $17.4 billion last year.
The International Monetary Fund said last week the US, Europe and Japan may experience the first simultaneous recession in the post-World War II era. China reported yesterday that its exports rose at the slowest pace in four months in October. The Bank of England predicted on Wednesday the UK economy will contract through most of 2009, after a report showed the nation's unemployment rate rose at the fastest pace in 16 years.
