The Hindu Business Line : Rupee declines 30 paise

The rupee depreciated by around 30 paise against the dollar on Monday following the meltdown in the domestic stock market. The currency opened at 40.70/72 and touched an intra day low of 40.83. It, however, recovered during the day to end at 40.72/73, against the previous close at 40.44/45. The domestic currency opened lower, reacting to the 0.25 percentage point cut in the discount rate by the US Federal Reserve. The downturn in the domestic stock market caused the rupee to fall further. However, nationalised banks and a few foreign banks were seen selling dollars, which helped the local currency trim its losses, said dealers.

Treasury heads believe that the global and domestic conditions remain very uncertain. With oil prices on the rise and domestic inflation remaining a concern, bankers fear that interest rates in India will continue to be under pressure. “The rupee is likely to weaken further as the view on the capital market remains negative and FII outflows continue. The rise in oil prices will also increase the trade deficit,” said Mr K Harihar, Head, Treasury, Development Credit Bank.

All other Asian currencies except the Japanese yen depreciated against the dollar on Monday. The rupee is expected to weaken further. Mr Sundeep Bhandari, Managing Director, Head-Global Markets, South Asia, said, “The rupee will weaken to 40.70 in the first quarter and will continue to slide to 41.30 in Q2, 42.50 in Q3, post which the home currency will gain some ground and will strengthen to 41.50.”

In the forward premia market, the 6-month closed at 1.59 per cent (1.37) and the 12 month ended at 1.17 per cent (1.07). –

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