A strong demand from importers coupled with weak equity markets has led the rupee to close at a two–month low levels against the dollar, as the central bank does not seem to have intervened to stem the depreciation.
The rupee closed at 55.18 against the dollar today as compared to 54.69 yesterday. "There were major bids from gold importers, especially since gold (price) is slightly down, which pulled the rupee down," said the dealer at the state-owned bank.
The currency fell 0.75 per cent for the week, in which the country's twin deficits again came to the fore with a string of disappointing macroeconomic data. The trade deficit for October widened to its worst at $21 billion, fuelling concerns about the current account deficit.
The tepid response to the telecom spectrum auction, which garnered about one-fourth of the budgeted Rs 40,000-crore, will make it difficult to keep the fiscal deficit in check.
Investors expect the rupee to closely track global developments next week with eurogroup ministers slated to meet on Tuesday to forge a deal on Greece. Worries over the US fiscal situation also continue to add to global growth worries. Domestically, all eyes will on the winter session of the Parliament which will start next week and it is to be seen if the government will be able to push through its key reform proposals like hiking foreign direct investment limit in areas like insurance.
"We expect India's growth recovery to remain shallow, as the worsening of the twin deficit suggests that the macro-economic imbalances have yet to correct," Nomura said in a note.