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Rupee falls to new low, recovers

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MUMBAI, April 3

THE rupee on Wednesday fell to a new historic low of 48.96 to a dollar before recovering to close at 48.89/90, nine paise weaker compared to its previous close.

The currency closed at its weakest level of 48.8150/8250 on April 2 while it last touched its lowest intra-day level of 48.89 on February 25.

Dealers said rising oil prices had moved sentiment against the rupee. Strong year-end capital inflows, which were seen till March 31, had slowed down in the new fiscal which resulted in considerable demand-supply mismatches, they said.

According to Mr Surinder Rosha, Head-Corporate Treasury and Sales, HSBC: "The market was basically short of dollars and hence, we saw some short-term covering. The demand is primarily on account of rising oil prices and uneasy sentiment on reports of the Government looking to pre-pay some of its external debt."

He added that the rupee may settle at levels of 48.90/95 for a few days, though it is likely to fall to 49 by next week. On Wednesday, the rupee opened lower than its previous close at 48.83 and saw a systematic fall to levels of 48.96 when the RBI intervened by selling dollars through nationalised banks. The dealers said once levels of 48.85 broke, importers panicked and rushed to cover. Analysts said a depreciation of the rupee was long overdue. The currency had only been kept in check on account of the year-end inflows.

"Once the new fiscal began, the rupee started depreciating. There has been some dollar demand in the market due to the RBI liberalising some norms such as permitting importers to re-book cancelled foreign currency forward contracts. Added to this, there have been export cancellations on expectations of the rupee weakening further," said one analyst.

Forward premia, tracking a weak rupee, closed higher, with the six-month forward premia closing at around 5.83 per cent (5.58 per cent) and the 12-month forward premia closing at 5.21 per cent (5.01 per cent).

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