mumbai June 19, 2012, 17:42 IST
mumbai 06 19, 2012, 17:50 IST
The rupee fell for a second session on Tuesday, hitting a 2-1/2 week low at one point, on the back of strong dollar demand from oil firms, while continued worries about euro zone debt also curbed some of the demand for risk assets.
Traders fear the rupee could make a renewed push to the record low at 56.52 hit against the dollar on May 31, and believe any breach below 56.20 may trigger intervention from the Reserve Bank of India.
Concerns about India's fiscal position and its economic growth outlook have resurfaced after Fitch Ratings on Monday became the second credit agency after Standard & Poor's to cut the sovereign outlook to "negative," while the RBI kept interest rates on hold.
"The dollar-rupee will continue to be range bound with a negative bias for the rupee. We may touch the previous life low of 56.52 per dollar," said Uday Bhatt, a forex dealer with state-run UCO Bank.
Strong dollar demand from oil firms, the biggest buyers of the currency in domestic markets, pushed the rupee to as low as 56.125 to the dollar, the lowest since June 1, before it regained some ground towards the close of trade.
Traders said earlier losses in the euro added to the downside pressure on the rupee, as they come during a time when renewed worries about India's outlook is eroding some of the mild recovery seen in the rupee that sent it to as high as 54.92 just over a week ago.
Global markets are now keenly awaiting the outcome of the two-day Fed meeting which ends on Wednesday, with some hopes for more monetary stimulus measures in the world's largest economy.
The one-month offshore non-deliverable forward contracts closed at 56.32 while the three-month closed at 57.05.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 56.06 on a total volume of $4.08 billion.
(Editing by Rafael Nam)