The rupee fell the most in over two months on Wednesday as state-owned banks bought dollars and exporters did not sell enough of the greenback.
The currency fell 1.24%, its biggest single-day drop since 3 September, to close at 62.40 per dollar against its previous close of 61.63 per dollar.
The partially convertible rupee opened at 61.9825 to a dollar and touched a low of 62.41 per dollar, its lowest since 2 October. For the most part of the day, the exchange rate hovered in the range between 62.15 and 62.25 a dollar.
Foreign-exchange dealers said there is a sudden demand from state-owned banks for dollars. “We don’t know why there’s a sudden buying interest. The Reserve Bank will close the dollar swap window sooner than later. Perhaps Indian banks are building up their dollar reserves before the exchange rate slides substantially,” a currency dealer with a foreign bank said, requesting anonymity.
State-run banks can provide dollars to oil marketers directly by swapping it with the Reserve Bank without having to buy the greenback from the market. The central bank introduced this facility to stabilize the rupee as the measure removes a daily oil-related demand of about $250 million from the currency markets.
However, according to the head of treasury at a state-owned bank, there was no hint from the central bank about closing the dollar-swap window for oil marketing companies.
The European Union on Tuesday lowered the growth outlook for the euro zone, boosting the dollar. This also strokes fears of a sell-off in emerging markets equities by risk-averse investors, who might get invested in dollar assets, said analysts.
“Part of the reason for the rupee movement today is that the dollar has strengthened in the overseas market. Also, the dollar deposit swap window is closing on 30 November. After that what new avenue of dollar inflow will come remains to be seen,” said Harihar Krishnamurthy, head of treasury at FirstRand Bank Ltd.
The Reserve Bank has allowed banks time till 30 November to receive overseas deposits and swap it with the central bank at a concessional rate. This has brought in more than $12 billion in dollars and has helped the currency gain strength.
Since January, the rupee has weakened 11.87% and is the third-most loser among all Asian currencies, after the Indonesian rupiah and the Japanese yen.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 80.451, down 0.31% from the previous close of 80.706.
The rupee was also pressured as local stocks fell for a second day. BSE’s benchmark Sensex ended at 20,894.94, down 0.38%, or 79.85 points from the previous close.
The yield on the 10-year benchmark government bond ended at 8.823%, up 0.96% from the previous close of 8.738%.
The inter-bank call money rate ended at 8.75%, up 25% from its previous close of 7%. In the offshore non-deliverable forwards, the one-month contract was at 63.01, while the three-month was at 64.06.
Source:- livemint.com
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