Apr 11, 2012, 01.02 PM | Source: Reuters
The rupee weakened on Wednesday as global risk taking faded and the currency appeared vulnerable, even though it pulled back from near three-month lows on the potential for RBI intervention.
"You cannot wish away global factors and domestic reasons point towards a weaker rupee for some more time at least," said a currency trader with another private sector bank.
Worries over global growth have lingered as Europe continues to stumble through a sovereign debt crisis while China announced disappointing imports data.
Slowing economic growth in India and a widening current account deficit are also piling pressure on the rupee.
At 11:42 a.m. (0612 GMT), the rupee was at 51.52-51.53 to the dollar, after hitting 51.64, a level not seen since January 16. It closed at 51.475-51.485 on Tuesday.
The rupee was trading weaker than the 50.51-51.48 range it has seen recently, with support for the rupee in the absence of central bank intervention seen at 52.13, the 61.8% retracement from the December 15 low to the February 6 high.
"Some long dollar positions are being cut due to worries the Reserve Bank of India may come and sell dollars anytime given the pace of the fall," said a senior currency trader with a large private-sector bank.
The RBI, which has been intervening intermittently to shore up the rupee in the past few months, is suspected to have sold dollars on Monday.
The central bank bought USD 1.1 billion and sold USD 1.4 billion in the spot market in February, data released on Monday showed.
Given the economic challenges, traders are awaiting the central bank's policy announcement next Tuesday for direction.
A majority of analysts polled by Reuters are expecting the RBI to cut rates for the first time in three years to help lift sagging growth.
India's main share index was down 0.6%, weighed by subdued risk appetite globally.
The one-month offshore non-deliverable forward contracts were at 51.97.
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 were all around 51.75, on a total volume of USD 767 million.