The Hindu Business Line : Rupee slips on terror impact

Mumbai, Nov. 28 The terror strike in the financial capital impacted sentiments in the local forex market. The domestic currency witnessed a sharp fall against the dollar amid thin trading volumes.

The rupee depreciated by 60 paise against the greenback on Friday, in a very volatile market. The rupee moved in the range of 55 paise during the day.

The domestic currency opened weaker at 49.70/72 and fell to an intra-day low of 50.25/26. It then recovered partially to close at 50.07/10, against Wednesday’s close of 49.50.

There was a supply side pressure on the rupee. With tourist inflow declining and higher perceived credit risk in the aftermath of the terror strikes, there could be a decrease in the dollar inflow, said Mr Moses Harding, Executive Vice- President, Head Global Markets Group, IndusInd Bank.

When volumes are thin, even small movements are exaggerated, said dealers.

Banks were trading only on behalf of their customers. There was only merchant covering which was taking place, and not much proprietary trade, said the chief dealer with a private sector bank.

There were very few players in the market. Since most of the banks have their dealing rooms in Nariman Point, which is very close to Hotel Trident, which was attacked by the terrorist, attendance was very thin. Besides, there was no intervention by the Reserve Bank of India to support the rupee, said a dealer with a private sector bank.

However, the forward premiums did not see much of a movement with the 6-month closing at 2.77 per cent and the one year closing at 1.89 per cent.

In the overseas markets, the dollar gained slightly against other major currencies.

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