Rupee falls below 42 against the dollar

IIP shadow on Re, Sensex

According to dealers, oil companies started buying more dollars after crude petroleum prices touched $125 a barrel, contrary to the expectation of a moderation this week.

On its way to 42, most of the dollar-rupee positions of banks ran into losses and they too joined the buying spree to cover open positions.

The spot rupee opened at 41.62, reached a high of 41.58, before hitting a low of 42.11 against the dollar.

At these levels, exporters started covering their long-term dollar receivables and the rupee managed to close at 42.00, said a dealer. Most of the oil-importing companies bought dollars and they were later joined by non-oil importers as well, a dealer added.

"The outlook on the rupee was bearish given the low industrial growth rate and the expectation of a high trade deficit. So there were no major foreign exchange inflows into the market. In fact, the spot rupee may touch 42.25-42.30 this week and if the demand continues, it could even touch 42.50 in two weeks," said a dealer of a nationalised bank.

Newswire18 adds: The Indian unit moved in a wide range of 41.56-42.10 today. "Sentiment for the rupee has turned very negative, so there was huge buying today apart from regular dollar demand from oil companies and other importers," said a dealer at a US bank.

"After the IIP data, most people were convinced the economy may moderate and inflows from foreign funds may slow down," said a dealer of a state-run bank.