Rupee falls for fourth day on weak equities, importer demand

Analysts await clues from the Fed Chairman to provide signal about a potential end to its monetary stimulus programme on Wednesday

The rupee fell for a fourth successive session on Wednesday to mark its longest losing streak in over three months, hurt by dollar demand from oil refiners and a late fall in equities.

The rupee's fall comes despite strong foreign flows into stocks and debt markets this year, as concerns about the current account deficit have revived after data earlier this month showed a spike in the April trade deficit.

Global dollar strength has also hit the rupee. However, analysts are awaiting clues from the Federal Reserve Chairman to provide signal about a potential end to its monetary stimulus programme on Wednesday. The U.S. central bank is also set to release minutes from its last meeting later in the day.

Technically, a breach of key support levels seems to have opened up more downside for the rupee.

"Weak equities and corporate demand put pressure on the rupee. The breach of 55.20 has slightly changed the outlook on the rupee," said Hari Chandramgethen, head of forex trading at South Indian Bank.

India Forex Advisors, in a note, said the breach of 55.40 if sustained may see the rupee falling to record low levels.

The partially convertible rupee closed at 55.46/47 per dollar compared with Tuesday's close of 55.41/42. The rupee dropped to as much as 55.6425 in session, its lowest since November 28.

Continued demand for the greenback from oil importers, particularly a large private refiner, weighed on the rupee on Wednesday, dealers said.

Meanwhile, shares fell for a third consecutive session on Wednesday, to their lowest close in almost two weeks after Larsen & Toubro Ltd slumped as its orderbook guidance sparked worries about the health of the domestic economy.

In the offshore non-deliverable forwards, the one-month contract was at 55.80 while the three-month was at 56.36.

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 closed at around 55.5875 with a total traded volume of $6.2 billion.