Mumbai: In line with weak stocks, the rupee today slipped by a hefty 33 paise — its fourth straight daily loss — to close at 62.25 against dollar amid RBI Governor Raghuram Rajan’s comment that an “excessively strong rupee” is undesirable as it triggers disinflationary pressures. Heavy demand for the American currency also hit the local unit, which had earlier in the session hit one-month high of 61.67 after a surprise rate cut by RBI citing easing inflation pressures and steps taken by government to revive growth.
However, it suffered a setback on the back heavy dollar demand from importers and state-owned banks. The rupee plummeted to hit an intra-day low of 62.28 at the Interbank Foreign Exchange (Forex) market before ending at 62.25 per dollar — a fall of 33 paise, or 0.53 per cent. “The rupee also depreciated after comments made from the RBI Governor that an excessively strong rupee is undesirable. This was contrasting to the statement made in the February meeting that the central bank was perfectly comfortable with the exchange rate,” said Admisi Forex, Director, Suresh Nair.
Additionally, we continue to see RBI build up reserves offered by strong inflows into India, Nair said, adding that this could also hurt sentiments. In stock market, both the benchmark indices – BSE Sensex and NSE Nifty finished sharply lower at 29380.73 and 8922.65, respectively after climbing historic highs in early trade.
Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 772.92 crore yesterday, as per provisional data. Benchmark brent crude continued to trade above the USD 60 a barrel mark in global markets today. The dollar index (DXY), which measures the Greenback against a basket of six major currencies, was up by 0.29 per cent hit 95.74 – its highest level since September 2003.
Earlier this week, Rajan had said high capital inflows have their own problems and warned that if a situation of currency depreciation were to arise, there can be problems for companies who have not hedged. The rupee plumbed new depths against the dollar on almost a daily basis in July-August 2013 and hit lifetime low of 68.85 on August 28. After the RBI and the government took steps to curb the rupee depreciation, the rupee stabilized. Meanwhile, the forward premia declined on fresh receipts from exporters.
The benchmark six-month premium payable in August slumped to 233.5-235.5 from overnight level of 244.5-246.5 paise and the forward contracts maturing in February 2016 also dropped sharply to 451-453 as against 465.5-467.5 paise. The Reserve Bank of India fixed the reference rate for dollar at 61.8543 and for Euro at 69.0974. The rupee retreated against the pound to 95.51 per pound from 95.16 previously and also fell back against the euro to 69.27 as against 69.16. However, it drifted further to 52.02 per 100 yen from 51.69 yesterday.