Rupee drops most in week to 59.41 vs USD ahead of RBI review

Ahead of the RBI's quarterly monetary policy review, the rupee today snapped three days of gains and closed 37 paise lower, the most in a week, to 59.41 against the dollar.

The currency also declined amid fresh month-end dollar demand from importers and a drop in local stocks. A weak dollar overseas ahead of the US Federal Open Market Committee meet this week and fresh capital inflows restricted the rupee's fall, a forex dealer said.

At the Interbank Foreign Exchange Market, the rupee opened lower at 59.10 a dollar from the previous close of 59.04. After touching a high of 59.08, it declined to a low of 59.45 and settled at 59.41, a fall of 37 paise or 0.63%. The rupee last fell by 37 on July 22.

The rupee had gained 72 paise, or 1.2%, in the past three sessions.

The benchmark S&P Sensex today dropped 0.78%. Foreign institutional investors injected Rs 278.04 crore on Friday, while they pulled out Rs 231.77 crore today, as per provisional data with the stock exchanges.

'Weakness in the rupee was mostly attributed to cautiousness ahead of the RBI monetary policy tomorrow,' said Abhishek Goenka, founder and CEO of India Forex Advisors. 'The negative closing in the stock markets and outflows to the tune of USD 250 million related to dividend payments by ITC also contributed to the losses in the rupee.'

A survey of external professional forecasters showed the median expectation on the rupee's value at 59.5 to the dollar by March 2014, the RBI said in its macroeconomic and monetary developments review released on the eve of the policy announcement.

In the global market, the dollar fell 0.14% against a basket of six major units, extending last week's losses, ahead of a monetary-policy decision from the Federal Reserve and key U.S. Monthly jobs data due later this week.