Reversing initial gains, the rupee breached the 55-level on Monday as trade deficit figures widened and industrial output decelerated, raising concerns about worsening current account deficit.

The currency unit, which had opened a tad higher at 54.69 from Friday’s close of 54.76, touched a low of 55.11 in the first trading session on indications of sluggishness in the economy and uneven demand and supply for the American currency.

However, it regained on mild dollar selling to close at 54.89 a dollar. Industrial growth declined 0.4 per cent in September, while trade deficit for the first seven months for the current fiscal was at $110 billion against $106.8 billion in the same period last fiscal.

In addition, retail inflation rose to 9.75 per cent in October from 9.73 per cent on costlier food items. This is likely to cause further depreciation in the rupee as inflation is a major factor in the Reserve Bank of India’s stance on key interest rate cut in its next monetary policy.

Call rates and G-Secs

The overnight call money rates closed higher at 8.14 per cent from its previous close of 8.05 per cent. Intra-day, it moved in the range of 7.95 per cent to 8.14 per cent. The 8.15 per cent government security, which matures in 2022, ended marginally higher at Rs 99.58 from a close of Rs 99.56 on Friday, while its yield remained almost unchanged at 8.21 per cent.

Beena.parmar@thehindu.co.in

(This article was published on November 12, 2012)
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