By BS Reporter
The rupee fell against the dollar today, amid demand from oil importers and uncertainties in the market ahead of the Reserve Bank of India (RBI)’s third quarter review of monetary policy tomorrow.
However, it may rise if the central bank cuts rates at the policy review.
Today, the rupee opened at 53.91 against the dollar and traded in the range of 53.75 and 53.96. It closed at Rs53.92, compared with Thursday’s close of Rs53.69.
This was the biggest fall for the rupee in the last three weeks.
“There was month-end dollar demand from oil importers, which resulted in weakening of the rupee against the dollar. Other Asian currencies, too, weakened against the dollar. That dampened sentiments,” said Sandeep Gonsalves, foreign exchange consultant and dealer, Mecklai & Mecklai.
Foreign institutional investors pumped in $466.81 million into domestic markets, compared with $221.92 million on Thursday.
According to Vikas Babu, senior currency dealer with Andhra Bank, the rupee’s movement tomorrow would depend on RBI’s monetary policy review. “If there is a rate cut, the rupee may touch 53.40-53.50 a dollar, as a rate cut would reduce the interest burden of corporates,” he said.
A few experts also revised the rupee’s near-term trading range. “The near-term trading range is now seen at Rs52.50-54.50 a dollar, down from Rs54-56. RBI’s rate cut action would be the trigger for extended gains below Rs53.10 into Rs52.50. Even in the event of a pause mode on rates, the worst case for the rupee is not seen beyond Rs54.10-54.35 a dollar,” said J Moses Harding, head (asset liability committee and economic and market research), IndusInd Bank.
He feels the sentiment on the rupee has improved after the steps to address the fiscal and current account deficits.
“The bearish set-up on the rupee from the risk of sovereign rating downgrade and fears of widening current account deficit are diluted and, along with a higher forex premium, the forwards market has shifted into a supply-driven mode,” he said.