* Rupee ends at 54.90/91 per dlr vs 54.36/37 on Thurs
* Traders expect the rupee to open below 55 levels on Mon
* Fitch downgrade threat rumour triggers stop-losses
By Swati Bhat
MUMBAI, March 1 (Reuters) - The Indian rupee dropped for a
second session on Friday, hiting its lowest level in over a
month-and-half as stop-losses were triggered in the dollar after
rumours of a possible downgrade by Fitch Ratings and the
follow-on breach of a key techinical level.
The rupee's fall continued a day after India unveiled a
surge in government spending despite expectations of an
austerity budget to shore up its finances.
Fitch Ratings sovereign analyst Art Woo had told Reuters
post-budget on Thursday that it would not impact India's
sovereign ratings, though the country could find it challenging
to meet its fiscal deficit target of 4.8 percent for the next
Traders, however, said there were rumors that Fitch was more
than likely to downgrade India following Woo's interview to some
local television channels earlier on Friday.
"The euro came down, there were some rumours regarding Fitch
talking of an India downgrade -- these together led to
triggering of several stops," said A. Ajith Kumar, a senior
foreign exchange dealer at Federal Bank.
"A close above 54.75 is not good news for the rupee. The
next major level to watch out for is 55.20 on the upside," he
The partially convertible rupee ended at 54.90/91
per dollar, after hitting 54.9425, its lowest since Jan. 9. The
pair had ended at 54.36/37 on Thursday. The rupee dropped 1.3
percent on the week, matching its fall in the Feb. 15 week,
which was its biggest weekly drop in three months.
The UDS/INR pair hit a high of 54.73 in opening deals but
quickly retreated. The 54.73 level was the 50 percent Fibonacci
retracement of the decline from the high of 55.89 on Nov. 26 to
the low of 52.87 on Feb. 6. The breach of that level, triggered
a further stop-loss in the dollar, traders said.
Traders said sharp losses in the euro also hurt sentiment
for the rupee.
The dollar index rose to its highest in six months on
Friday, buoyed by the greenback's gains against the euro with
the single currency hurt by poor economic data from Italy even
as the U.S. economy continued to show signs of improvement.
"The rupee is broadly moving in co-relation to the equity
markets for now. I think the pair could head higher in the short
run and the direction may change post-April," said Rajeev
Mahrotri, head of forex and debt trading at IndusInd Bank.
"Commodities: gold and oil and the euro would be key things
to watch for the ruepe. INR will not strengthen until gold comes
off but the good news is that gold looks like it's headed
further down," he added, predicting a range of 52.50 to 56.00
for the next three months.
Local shares, however, rose on Friday, rebounding from
three-month lows as budget losses were seen to be overdone.
In the offshore non-deliverable forwards, the
one-month contract was at 55.33 while the three-month was at
In the currency futures market, the most-traded
near-month dollar/rupee contracts on the National Stock
Exchange, the MCX-SX and United Stock Exchange all closed at
around 55.24 with a total volume of $7.06 billion.
(Editing by Sunil Nair)