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Indian Rupee Falls Again
MUMBAI – The Indian rupee fell against the U.S. dollar for the eighth consecutive session Wednesday as local stocks slipped deep into the red and fresh concerns emerged over a worsening sovereign-debt crisis in Europe.
Indranil Mukherjee/Agence France-Presse/Getty Images
A bank cashier counted rupee notes at a bank in Mumbai on November 22, 2011.
The dollar was at 52.36 rupees late Wednesday, up from 52.30 rupees Tuesday. The dollar slipped to an intraday low of 51.80 rupees in early trade on heavy sales by a large oil firm and an engineering company on expectations that the central bank may announce measures to ease dollar liquidity in the system. Dealers estimated the companies likely sold about $400 million in the market.
The rupee, however, soon reversed its gains, as Indian shares slumped to their lowest level in more than two years. The Bombay Stock Exchange's Sensitive Index fell 2.3% to 15699.97.
The dollar may move in a 51.00 rupee-54.00 rupee range in the near term, he said.mode despite weak U.S. fundamentals. This is mainly on a buildup of economic, monetary and fiscal pressures on the euro zone with no signs of a rollout of concrete rescue packages," said Moses Harding, head of economic and market research at IndusInd Bank.
The Reserve Bank of India could take measures such as deregulating interest rates on foreign currency non-resident accounts and issuing rupee-denominated corporate bonds to overseas investors to avoid a hard landing for the economy, Mr. Harding said.
The rupee has lost nearly 18% against the dollar since April. The sharp depreciation will lead to a surge in the import bill of Asia's third-largest economy, offsetting benefits from a decline in global commodity prices.
In the bond market, investors sought safety of government debt following a wave of risk aversion amid the economic turmoil in the euro zone.
The benchmark 8.79% 2021 bond ended at 99.85 rupees, up from 99.64 rupees at Tuesday's close. The RBI's choice of paper for its open market operations was also in line with market expectations and helped maintain the positive mood.
"The central bank will need to follow this up with more bond buybacks to bring down yields," a dealer with a private-sector bank said.
The RBI plans to buy 100 billion rupees of government debt Thursday, including the 7.99% 2017 note, the 7.83% 2018 paper, the 7.80% 2021 and the 8.13% 2022 bonds.
