The Hindu Business Line : Re breaches 40 on dollar shortage

The rupee crossed the psychological level of 40 and shed 28 paise against the dollar on the back of sustained buying of the greenback by oil companies. The home currency opened on a weaker note at 40.03, touched an intra-day low of 40.24 and ended the day at 40.21/22, down from the previous close of 39.93. The last time the rupee touched 40.20 was on September 20, 2007.

Market participants blame the weakness in the home currency to the huge mismatch between the demand and supply of dollars.

"Exporters have not been selling dollars at this depreciated level and hence the dollar supplies are not coming. On the other hand, importers are covering their positions and are buying dollars," said Mr K. Harihar, Head-Treasury and Financial Institutions, Development Credit Bank. The weak Indian stock market has also pushed foreign institutional investors to pull put dollars from the market, said a forex dealer at a private bank. Market participants expect the rupee to depreciate further and trade at 40.50-40.60 levels this week. Exporters may come back into the market and sell dollars at this level, dealers said.

The 3-month forward dollar closed at a discount of 1.19 per cent (-1.38 per cent) and the 6-month forward also ended at a discount of 0.25 per cent (-0.25).The 12-month ended at a premium of 0.45 per cent (0.56 per cent). - Our Bureau

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