RUPEE ERASES EARLIER GAINS; MORE FALLS EXPECTED
DATE: 19/04/2012
The rupee fell to its lowest in three months on Wednesday, erasing all intraday gains as traders bet on a much more cautious central bank now that it has delivered a bigger-than-expected rate cut.
Lingering concerns over India's widening current account deficit (CAD) and its high fiscal deficit was particularly seen hurting the rupee's ability to gain vis-a-vis the dollar, traders said. Domestic stocks also came off their earlier highs on Wednesday, further weighing on the rupee.
"It (rupee) may not appreciate substantially from current levels due to the CAD, BOP (balance of payments) situation, coupled with reduced maneuverability for the central bank due to high fiscal deficit,"
The rupee closed at 51.78/79 to the dollar from Tuesday's close of 51.48, marking its lowest level since January 16. Traders said the rupee looked set to fall further and are eyeing initial support at 52.12, the 61.8% retracement of the December-February gains.
The Reserve Bank of India cut rates on Tuesday by an unexpectedly sharp 50 basis points but warned there was limited scope for more cuts due to upside risks to inflation, which stood at 6.89% in March.
The one-month offshore non-deliverable forward contracts were at 51.78. In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange all ended around 51.90, on a total volume of $3.64 billion.
Lingering concerns over India's widening current account deficit (CAD) and its high fiscal deficit was particularly seen hurting the rupee's ability to gain vis-a-vis the dollar, traders said. Domestic stocks also came off their earlier highs on Wednesday, further weighing on the rupee.
"It (rupee) may not appreciate substantially from current levels due to the CAD, BOP (balance of payments) situation, coupled with reduced maneuverability for the central bank due to high fiscal deficit,"
The rupee closed at 51.78/79 to the dollar from Tuesday's close of 51.48, marking its lowest level since January 16. Traders said the rupee looked set to fall further and are eyeing initial support at 52.12, the 61.8% retracement of the December-February gains.
The Reserve Bank of India cut rates on Tuesday by an unexpectedly sharp 50 basis points but warned there was limited scope for more cuts due to upside risks to inflation, which stood at 6.89% in March.
The one-month offshore non-deliverable forward contracts were at 51.78. In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange all ended around 51.90, on a total volume of $3.64 billion.
POWERED BY: THE ECONOMIC NEWS
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