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Rupee falls as stocks slump; PM says to facilitate inflows

Source : REUTERS
Last Updated: Wed, Apr 03, 2013 12:20 hrs
An employee uses an electronic machine to check an Indian currency note inside a bank in Allahabad

The Indian rupee fell on Wednesday, tracking a decline in domestic stocks on global risk aversion ahead of the key global central bank decisions and U.S. jobs data and on continued concerns over political stability at home.

The rupee has started the new fiscal year on a cautious note, after data last week showed the current account deficit surged to a record high in the October-December quarter.

Prime Minister Manmohan Singh said on Monday the government was carrying out a comprehensive review of its policy on foreign direct investment and was committed to reining in the fiscal deficit.

However, the rupee has been buffeted by growing talk of early elections after a key ally withdrew from the ruling coalition last month, which may put reforms and decision making on ice.

"The answer to rupee's fall lies in equities. The rupee will continue to have a bias towards weakening and will be dictated by global developments," said Navin Raghuvanshi, associate vice president at Development Credit Bank.

The partially convertible rupee closed at 54.43/44 per dollar versus 54.26/27 on Tuesday, after moving in a narrow 54.345 to 54.46 band.

Indian shares snapped a four-day winning streak to post their biggest falls in two weeks as the market turned increasingly jittery over the political uncertainty.

The rupee is also awaiting to take direction from the key global events this week, especially the U.S. monthly jobs report due on Friday.

The Bank of Japan is widely expected to ramp up its bond buying programme when it announces its decision on Thursday, while the European Central Bank's policy decision is also due on the same day after recent weak euro zone data.

However, dealers said the rupee found some support on Wednesday from inflows of about $200 million related to overseas borrowing by a large steel company.

In the offshore non-deliverable forwards, the one-month contract was at 54.81 while the three-month was at 55.45.

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 54.74 with a total traded volume of $3.1 billion.


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