Rupee hits 11-week low; outflows, oil payments eyed

The rupee fell to its lowest in 11 weeks on Tuesday, extending losses to as much as 2.9% over six sessions, on heightened worries about foreign fund outflows as investors fled risky assets across markets.

While a drop in world oil prices was positive for energy-hungry India, the country's dues of more than USD 3 billion for imports from Iran were an overhang for the rupee, traders said. "Assuming an outstanding bill of USD 5 billion to Iran, I think there is a fair bit of oil related dollar buying still to come," said a senior foreign exchange dealer at a private-sector bank. "So the rupee's direction will be impacted by the quantum of oil dollar buying we see." To convert USD to INR, click here http://www.moneycontrol.com/mccode/currencies/

On Monday, Iran said it had so far received USD 1.4 billion from India in the last 10 days for long overdue oil debts. Brent crude plunged to a six-month trough below USD 99 a barrel, in a two-session drop of nearly USD 10, after a US credit downgrade intensified fears about a global slowdown in demand for energy. At 11:53 am (0623 GMT), the partially convertible rupee was 45.17/18 to a dollar, after weakening to 45.40 early, its lowest since May 25. It had weakened 0.5% on Monday to 44.965/975. Traders said exporters were cashing in their dollars with the rupee falling sharply over the past one week. "There is a big support for the rupee near 45.50 level and unless equities drive off the cliff, we could see a slight rupee recovery mostly due to profit sales," said a foreign exchange dealer with another private-sector bank. The main 30-share BSE index pared losses to 0.4%, after initially sliding 3.3% to its lowest in more than 14 months on global jitters. The Swiss franc surged to a record high against the euro in Asia as investors' confidence was shattered by extended falls in regional share prices, prompting them to flock to safe-haven currencies. The euro was at USD 1.4228 from USD 1.4257 when the rupee closed on Monday. The index of the dollar against six major currencies was down 0.22% at 74.594, but above 74.540 when the local market closed on Monday. The one-month onshore forward premium was at 17.50 points from 20 points on Monday, the three-month was at 51.25 points from 58.25 and the one-year onshore forward premium was at 164 points from 178. One-month offshore non-deliverable forward contracts were quoted at 45.39, weaker than the onshore spot rate. 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 were all at 45.3425. The total volume was at USD 7.51 billion.