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| Re weakens further, nears 50 |
| BS Reporter / Mumbai Nov 20, 2008, 00:35 IST |
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The rupee On Wednesday turned weak to close near Rs 50 to a dollar as banks bought greenback for importers and foreign funds. The sustained fall in the stock markets due to offloading by overseas funds also contributed to the depreciation.
 The rupee was down 35 paise from Tuesday's close of 49.65 rupees. It moved in the band of 49.65-49.75 for major part of the session. However, the fall in local share market coupled with huge dollar demand from importers dragged it down further, dealers said.
Three large state-owned banks were believed to have sold the dollar around 49.80, giving rise to talk that Reserve Bank of India sold dollars to stem the market.
Dealers estimated that the central bank sold about $200 to $250 million.
A large private petrochemicals company and a large private engineering company were believed to have bought the dollar around 49.75 , dealers said.
The share market ended over 1.50 per cent down after a 2.00 per cent rise earlier in the day.
"The movement in dollar-rupee has been because of demand-supply mismatch. It has been following the movement in stock market--in the sense as there have been FII outflows,” a dealer said.
Foreign funds have withdrawn more than $13 billion from Indian stock markets so far in 2008, after buying a record $17.4 billion last year.
One-month offshore non-deliverable forward contracts were quoting at 50.80/95, 1.5 percent weaker than the onshore spot rate, providing a good arbitrage opportunity. Dealers said some banks were buying dollars in the onshore market to sell offshore and cash in on the price difference.
On future price trends a senior treasury executive with Bank of India said: “There is high level of uncertaintity in the international market. Hence rupee will continue to lose strength.”
| Currency |
2008
|
%
change
|
| Jan 2 |
Nov 19 |
| Korean won |
925.65 |
1446.7 |
-56.29 |
| Indonesian rupiah |
8985 |
12010 |
-33.67 |
| Pakistani rupee |
60.90 |
79.38 |
-30.34 |
| Indian rupee |
44.23 |
49.99 |
-13.02 |
| Taiwan dollar |
32.40 |
2-Feb |
-2.65 |
| Malaysian ringgit |
3.53 |
3.61 |
-2.21 |
| Singapore dollar |
1.531 |
1.528 |
0.18 |
| Hong kong dollar |
7.78 |
7.75 |
0.39 |
| Thai baht |
35.41 |
35.02 |
1.10 |
| Japanese yen |
118.85 |
96.83 |
18.53 |
The prospect of slowdown in exports are distinct. This will reduce flow of foreign currency into the country. In the near term, the rupee may weaken and may even breach the all-time low level, said a treasury executive with foreign bank.
While RBI may continue with intervention to halt the rupee from weakening, it comes with risk of pressure on domestic liquidity. It will takeout rupee resuces while pumping dollars.
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