Rupee flirts with 56 yet again; exporters to the rescue

By Swati Bhat

MUMBAI (Reuters) - The rupee came within striking distance of a nine-month low on Tuesday on heavy defence-related buying of dollars, although exporters helped prevent a bigger slide by selling the greenback.

The rupee dropped to as low as 55.9950, just short of breaching the 56.01 level touched last Thursday, which had marked the currency's weakest level against the dollar since early September 2012.

The rupee has fallen heavily this month despite huge foreign inflows into stocks and debt amidst a global rally in the dollar and concerns about India's current account deficit.

"Oil demand was there but not that aggressive today. It was mainly defence buying by state-run banks and some other month-end importer demand which hurt," said Pramod Patil, assistant vice president, forex and money markets at United Overseas Bank.

The partially convertible rupee closed at 55.9550/9650 per dollar compared to 55.5675/5775 on Monday. The pair moved in a 55.64 to 55.9950 range during the session.

The rupee had weakened through most of the session, with traders attributing it to dollar demand to meet defence-related payments.

That demand was offset by exporter selling of dollars and expectations the central bank would intervene, should the rupee fall below the psychological 56-per-dollar mark.

Traders said a fall in other Asian currencies also hurt the rupee. The Philippine peso slid to an eight-month low against a broadly firmer dollar on Tuesday.

In the offshore non-deliverable forwards, the one-month contract was at 56.29 while the three-month was at 56.84.

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 55.94 with a total traded volume of $6.77 billion.

(Editing by Sunil Nair)