Rupee in free fall: Dips to near one-year low

The rupee weakened further today due to month-end dollar demand. Besides, foreign institutional investors (FIIs) pulled out of the domestic markets and this also led to the slide.

The rupee ended at 56.51, almost near a one-year low, compared with the previous close of 56.38 a dollar. The currency had ended at 56.81 a dollar on June 28 last year.

During the day, the rupee touched a high of 56.40 and a low of 56.76. "After the Gross Domestic Product (GDP) data came out today, equity markets turned bearish, due to which FIIs withdrew their investments. Besides that, there was month-end dollar demand," said S Srinivasaraghavan, executive vice-president and head-treasury of Dhanlaxmi Bank. GDP growth slowed to 4.8 per cent in the January-March quarter and fell to a decadal low of five per cent for the 2012-13 financial year.

According to currency dealers, during the last few hours of trading today, state-run banks bought dollars to meet the demand of oil importers, due to which sentiments were dampened. Since the start of this financial year, the rupee has weakened by 4.13 per cent.

"Throughout the week we saw the rupee weakening against the dollar and surpassing the key levels of 56-56.20. On Thursday, Reserve Bank of India's (RBI) reality check on the inflation and current account deficit jolted the sentiment of the investors on the rupee," said Abhishek Goenka, founder & CEO, India Forex Advisors. Goenka said he maintained a bearish bias on the rupee and expected it to slide towards 57-58 levels.

Currency traders feel the rupee will strengthen for a brief while. Month-end dollar demand is over and exporters will be selling dollars at these levels, said a currency dealer with a public sector bank.