Rupee seen weakening further by end-December

Dollar buying spree by RBI, corporate buying to weigh

The rupee is seen weakening further by the end of this month as the Reserve Bank of India (RBI) buys more dollars to build up its foreign exchange reserves.

Currency dealers say the RBI has been on a dollar buying spree through nationalised banks. Experts believe the rupee may even touch a level close to 63 per dollar as oil marketing companies have been buying dollars to build their oil reserves amid easing oil prices.

Latest data shows that RBI’s net dollar purchases from the market almost doubled in October to $2.7 billion compared with $1.44 billion the previous month. The net dollar purchases were, however, less than July levels of $5.45 billion.

“Till yesterday nationalised banks were buying dollars on behalf of RBI and today too their presence is there, but there has also been dollar buying by corporates due to which the rupee is weakening,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.

Latest data shows that RBI’s foreign exchange reserves rose by $1.43 billion for the week ending November 28 to $316.31 billion.

“Minor depreciation in the rupee will be welcomed by the central bank to support exports. Till end-December, the rupee may trade in the range of 62-63 per dollar,” said Ashutosh Khajuria, president (treasury), Federal Bank.

At 11:15 am, the rupee was trading at 62.19 compared with previous close of 62.02 per dollar.