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Apr 24, 2012, 06.58 PM IST
The rupee hit a three-and-half month low on Tuesday, continuing to build losses as the lack of any clear signs of intervention from the central bank encouraged investors to build up dollar positions.
Importer demand for dollars also contributed to the gains in USD/INR, according to some traders, as was market talk about a potential relaxation in regulations concerning the forward bookings of dollars.
The rupee closed at 52.68 to the dollar after dipping to 52.8650, a level last seen on January 9. It had settled at 52.52 on Thursday.
"At this stage 53.20 looks toppish (on the USD/INR) for the week. The importer dollar demand (from oil firms) seen in the past few days can be characterised as panic buying on worries rupee could fall more," said Kamlakar Rao, head of foreign exchange trading at state-owned Allahabad Bank .
Since hitting a 2012 low at 48.60 in early February, USD/INR has surged reflecting the dropping confidence in the local currency.
India's wide current account deficit, stalled financial reforms, and doubts about monetary easing have all been factors behind the drop in the rupee.
Traders see a near-term respite, with USD/INR facing strong resistance at 52.94-53.00, or the 76.4% retracement of its December-February fall.
However, failure by the RBI to defend the rupee could see USD/INR quickly approach the record high of 54.30 hit in mid-December, according to traders.
"They may have to sell a few billion dollars from the precious reserves to push the rupee back to near 49-50 levels, but it will be worthwhile because if they don't give a signal, demand could definitely put it back below 54," a senior currency trader said.
The one-month offshore non-deliverable forward contracts were at 53.08-53.18.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 52.8 on a total volume of USD 5.1 billion.
Tags: rupee, central bank, dollar, Allahabad Bank, current account deficit, RBI, National Stock Exchange, MCX-SX, United Stock Exchange
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