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Rupee edges down as oil refiners buy dollars

Source : REUTERS
Last Updated: Tue, Nov 20, 2012 17:19 hrs
A grocery shop owner counts rupees in the western Indian city of Ahmedabad

The Indian rupee closed slightly weaker on Tuesday, ending above 55 to the dollar for a third consecutive session, hurt by weakness in domestic shares and by demand for the greenback from oil companies.

Traders said they will closely monitor the winter session of parliament due to start on Thursday, which comes amid worries about the government's ability to contain the fiscal deficit at 5.3 percent for the year ending in March.

Confidence about the government's resolve in shoring up its finances could improve the outlook for the rupee, which has weakened 6.9 percent since hitting a six-month high of 51.32 in early October.

"It has been a very ranged market. The winter session of parliament will impact stocks, and thereby the INR as well, but hovering around 55 is not very good for INR," said Paresh Nayar, head of fixed income and forex trading at First Rand Bank.

"Any move above 55.25 may trigger further fall towards 56.00, so I will be more comfortable with INR moving towards 54.30. The fact that trade deficit is at an all time high and crude demand is nearly $725,000 per day, on average, is putting pressure on INR," he added.

The partially convertible rupee closed at 55.0950/1050 versus its previous close of 55.06/07 as per the SBI closing rate.

India's trade deficit widened to a record $20.9 billion in October, a particular concern given the country suffers from a wide current account deficit.

Oil firms, the largest buyers of dollars in the domestic currency market, were spotted buying the greenback persistently this week, traders said.

In the offshore non-deliverable forwards market, the one-month contract was at 55.34 while the three-month was at 55.93.

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 55.13 with a total traded volume of $4.3 billion.

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