Rupee dips due to pre-Budget caution

The rupee depreciated and breached the level of 60 a dollar due to caution ahead of the Union Budget presentation on Thursday, its biggest single-day fall in nearly three weeks. According to currency dealers, dollar demand from importers weakened the currency. It ended the day at 60.02, compared with Friday’s close of 59.74. It opened at 59.80 and during intra-day trade, touched a low of 60.05.

“A firm dollar in the global market and demand for the greenback in the domestic market from the custodian banks pushed the local unit below 60. The rupee did not draw cues from the upswing in the domestic equity markets,” said Anindya Banerjee, currency analyst, Kotak Securities.

The rupee is seen weakening further ahead of the budget. The rupee range before the budget may be between Rs 59.50 to Rs 60.25 per dollar and the bias is towards weakening.
 

RUPEE/DOLLAR

• Monday saw rupee’s biggest single-day fall in nearly three weeks
• The range before the Budget is seen as between 59.50 and 60.25, with the bias towards weakening
• RBI might not intervene in the forex market unless there is a sharp depreciation of the Rs  in the next 2 days

“Today, there was dollar demand from oil marketing companies and importers. Foreign banks were buying dollars to cater to the demand of importers. Even nationalised banks bought dollars in early trading sessions,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.

Today's fall in rupee tracked weaker Asian currencies. But the rupee found some support as there were dollar inflows in domestic markets.

“The US market was closed on Friday. Due to that, the dollar was stronger globally. That added to weakness in the rupee. There is also caution in the domestic market ahead of the budget due to which there was dollar demand," said the head of treasury of a large state-run bank. According to the official if in the budget the fiscal deficit is kept lower, that shall help in appreciation of the rupee.

According to most currency dealers, the Reserve Bank of India (RBI) may not intervene in the foreign exchange market unless there is sharp depreciation of the rupee in the next two days ahead of the budget. "RBI's objective is to arrest excess volatility. If rupee depreciates to a level like Rs 60.20-60.25 sometime in the next two days, then probably RBI may start selling dollars through state-run banks to save the rupee," said a currency dealer.