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Priya Nair

Mumbai, Aug. 18 The rupee lost nearly 60 paise against the greenback on Monday following heavy dollar-buying by oil companies and other corporates. Though volumes were low, spot prices saw one way downward movement that led the rupee to the level seen more than a year ago.

The rupee which opened lower at 43.28 traded at an average level of 43.30 for the major part of the day.

Towards the end of the trading session, heavy dollar-buying pulled it down to close at 43.59/60, against Thursday’s close of 43.01. The rupee is 1.33 per cent lower than Thursday’s close.

With the Reserve Bank of India having shut the special liquidity window, oil companies were seen actively buying dollar at various levels to meet their daily requirements.

A forex dealer with a private bank said, “Once the rupee crossed the 43.35 mark, there was absolutely no dollar- selling. There was heavy dollar buying at the last moment, as many inter-bank participants tried to cover positions.”

Dealers were expecting the central bank to enter the market selling dollars to support the rupee. However, this did not happen, said a currency trader.

The new support level for the rupee now is seen at 43.30 and the resistance at 43.80, said dealers.

Mr L. V. Prasad, Assistant Vice-President, IndusInd Bank, said, “There is a demand-supply mismatch, especially after the RBI stopped the special oil bond market operations for oil companies. Now it looks as though levels of 44 are possible anytime.”

Today’s sharp fall was also on account of adjustments following the long week-end and is not truly a representative one, because of the low volumes, said dealers. “Many dealers are away to attend an overseas conference of the Foreign Exchange Dealers Association of India. As tomorrow is a holiday in Mumbai, the actual picture will be clear only on Wednesday,” said a dealer.

A weak rupee will increase the import bill due to the high oil price and add to the current account deficit. Even if exports could benefit from the depreciating rupee, the market for exports itself is shrinking due to the overall global slowdown, said an economist with a public sector bank.

Oil was at over $114 for a barrel on Monday.

The dollar has been strengthening in the overseas market over the past week, on fears of a slowdown in Europe and the UK. The forwards market also closed lower, with the six-month premium closing at 2.87 per cent (4.16 per cent) and the 12-month at 2.55 per cent (3.36 per cent).

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