Rupee weakens further on FII pullout

The rupee came under further pressure on Monday to hit a two-month low on a spurt in month-end demand from importers — especially oil companies — for the greenback besides a dip in stock markets.

Treasury executives and bankers said besides short-term factors like weak equity market and month demand, market is equally apprehensive about the high Budget and current account deficit.

The rupee ended at 51.2650/2750 to the dollar, sharply weaker than its previous close of 51.17/18, after dipping as low as 51.4850 — a level last seen on January 16, going by Thomson Reuters data.

The global currency markets are generally trading flat. There is an air of bearishness owing to some doubts over the US economic growth momentum and China’s growth outlook. Spain’s debt woes could reignite the debt concerns in the euro zone.

Standard Chartered Bank said the rupee could further weaken in the near term. Following the mid-quarter review of the monetary policy on March 15 and the FY13 Budget announcement the next day, investors are re-assessing the positive outlook for India. A positive outlook has dominated markets at the start of 2012.

The shift in outlook (post mid-March) has led to a sharp slowdown in portfolio inflows, with March inflows amounting to only $963 million so far against $7.4 billion in February. Meanwhile, the trade deficit remains elevated, fuelling current account deficit financing risks.

The currency has weakened for a fifth day after Italian Prime Minister Mario Monti warned over the weekend that Spain could reignite Europe’s debt crisis, sapping demand for emerging-market assets.

Call rate ends steady
Call rate ended stable on overnight call money market here on Monday on alternate bouts of demand and supply. The overnight call money rate settled at its last Thursday's closing level of nine per cent. It moved in a range of 9.65 per cent and 8.9 per cent. The Reserve Bank of India under the Liquidity Adjustment Facility purchased securities worth Rs 1,95,635 crore from 78 bids at the one-day repo auction at a fixed rate of 8.50 per cent.