The Hindu Business Line : Rupee drops 18 paise

Mumbai, Nov. 23 The rupee slumped by around 18 paise against the greenback on Friday as foreign institutional investor-related outflows led to sustained dollar buying by banks.

The domestic currency has fallen by over 30 paise in two consecutive days.

The rupee opened at 39.48/49, slipped to 39.58/59 and climbed back to 39.51/52.

It then dropped to close the day at 39.7150, against Thursday’s close at 39.53.

Dealers said that besides FII outflows, there was dollar buying due to defence-related and ‘month-end’ payments.

Nationalised banks were also seen buying dollars, possibly on behalf of the Reserve Bank of India. “Thursday was a holiday in New York, so there could have been some bunched-up dollar outflows,” said a dealer.

Market participants said the outlook for the rupee was bearish in the shorter-term, but bullish in the medium term.

“The rupee may dip in the near-term as FII allocations in December are not very large, due to the year-end. But the rupee is likely to stay firm in the long run as the booming economy will continue to invite foreign investment,” said Mr L.V. Prasad, Vice-President, Treasury, IndusInd Bank.

Forex dealers expect the rupee to move in a band of 20-30 paise in the next few days. There was a drop in forward premia across maturities.

Forwards fall

Exporters were seen selling dollars at the shorter-end. The six-month premium fell to 1.16 per cent (1.54) and the 12-month also dropped to 0.94 per cent (1.22).

Textile exporters were, however, not enthused by the fall in the rupee. Mr Vijay Agarwal, Chairman, Apparel Export Promotion Council, said , “The rupee has gone up by around 12 per cent in this year and this 18-paise fall is just a function of the demand-supply situation. Today, it has gone down; tomorrow it will go up again.”

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