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Rupee falls on global risk aversion policy reforms key

Investors are also eyeing any possible policy reforms from the government after the presidential election results are out

Reuters  |  Mumbai 

The fell on Friday, snapping three successive weeks of gains, as risk aversion pummeled global risk assets such as the euro, though buying of the local unit ahead of an auction of debt limits to foreign kept losses in check.

The accelerated losses in the afternoon session as the slumped, victim of a steady stream of negative news from the zone, including that Spain's Valencia region would seek central government help to repay debt.

Global risk sentiment will continue be key for the next week, although are also eyeing any possible policy reforms from the government after the presidential election are out on Sunday.

Hikes in diesel prices to cut the ballooning subsidy bill and allowing foreign investment into multi-brand retail are among the measures India is expected to push in the near term.

Worries about India's ability to meet its fiscal deficit target of 5.1 percent and slumping growth have been key factors behind the rupee's slump to a record low late last month.

"I expect the to appreciate in future. The government may come out with reform measures very soon to reduce the deficit and encourage inflows," said Ssharad D Pawaar, chief executive at SPFX India, a forex advisory firm.

He expect the dollar/to trade below 54 in the next 1-2 months.

The partially convertible closed at 55.32/33 per dollar, as per the SBI closing rate, weaker than its close of 55.12/13 on Thursday.

The local currency fell 0.3 percent during the week.

Broader losses were cut on dollar sales, believed to come from foreign institutional planning to bid for the auction of unused debt limits on government and corporate bonds later in the day.

The one-month offshore non-deliverable forward contracts were around 55.57 while the three-month was at 56.19.

In the currency futures market, the most-traded near-month dollar-contracts on the National Stock Exchange, the MCX-SX and United Stock Exchange all closed at around 55.39 with the total traded volume at around $3.8 billion.


First Published: Fri, July 20 2012. 17:40 IST