Rupee edges up; record current account deficit fans concerns

Last Updated: Tue, Apr 02, 2013 11:58 hrs

The Indian rupee edged higher in range-bound trade on Tuesday, the first trading day of the new fiscal year, helped by bunched-up inflows, but a record current account deficit weighed on the currency's fortunes.

The country's current account gap rose to hit $32.63 billion in the final three months of 2012, compared with $22.3 billion in the September quarter, data released late on Thursday showed.

Indian forex markets were closed on Friday and Monday for local holidays.

The government is trying to tackle the record deficit. It has eased rules for foreign investment in debt and is trying to push legislation in parliament to open up the insurance and pension sectors.

"Bunched-up inflows and positive equities helped the gains. Concerns are lingering on the current account deficit, but inflows are helping," said Vikas Babu Chittiprolu, a forex dealer with Andhra Bank.

The partially convertible rupee closed at 54.26/27 per dollar versus 54.28/29 on Thursday, after moving in a narrow 54.2425 to 54.3650 band.

Local stocks gained for a fourth successive session, rising 0.93 percent.

Dealers are also increasingly concerned about developments on the political front as chatter about early elections makes investors nervous about the stability of the government and the future of reforms.

"Reforms through executive decisions are still possible, but risk reform fatigue among investors if macro outlook does not improve," Standard Chartered Bank cautioned in a note.

In the offshore non-deliverable forwards, the one-month contract was at 54.66 while the three-month was at 55.27.

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 closed at around 54.60 with a total traded volume of $3.1 billion.

More from Sify: