The Indian rupee fell against the dollar on Monday to 55.90 to the dollar on account of a rise in demand for dollar due to weakness in the euro.
At 1.30 p.m., the rupee was at 55.75 to the dollar, down 14 paise or 0.25 per cent down from Fridays close. It had opened stronger for the third straight session on Monday, buoyed by the surge in regional stocks after European leaders agreed to shore up the region's troubled banks. After rising over 2 per cent, the Indian currency had closed at 55.60 to the dollar on Friday, in what was its largest gain in three years on account of GAAR clarification and EU deal.
Euro dipped on Monday, giving up a bit of ground after its biggest one-day climb in eight months, as investors look for fresh reasons to extend a rally sparked by initial euphoria over the latest European push to ease the region's debt crisis.
RELATED STORIES Rupee at 55.61 to dollar; biggest daily gain in three years Rupee at 8 day-high of 55.79 against dollar on EU agreement, GAAR Rupee flat, but stays below 57-mark against dollar Rupee falls to 57.11 to dollar, RBI intervention watched Rupee closes with marginal gains at 57.01/$ as RBI disappoints Traders however say volumes are much lower due to quarterly closing of RBI accounts, leading to higher volatility in the market.
The RBI has intervened repeatedly after the currency resumed declines to record lows against the dollar, mirroring declines in May. The currency hit its lowest ever at 57.33 on Friday.
The rupee has earlier failed to gain traction despite measures announced by the central bank on India to bolster the currency, including raising the investment limits on government bonds for foreign investors. It had also asked oil companies to get 50 per cent of their dollar needs from state-owned banks.
The country too has been besieged with concerns over slowing growth, rising inflation and poor investor sentiment. While GDP slowed to 5.3 per cent in the fourth quarter of FY12, inflation has been persistently over comfortable levels. Credit rating agencies Fitch and S&P too warned about a paralysis in policy making affecting the country.
The domestic worries, compiled with global risk aversion on account of the Euro crisis have been weighing on the rupee, which has fallen close to 7 per cent this year, making it the worst performing currency. -------------------------------
Rupee weakens further against dollar; down 48 paise
The Indian Rupee weakened further on Tuesday against the US dollar and hit an intraday high of 55.88/$. It retraced gains from the past three days to end at 55.67/$ as weakness in the euro continued to fuel worries over the outlook for the euro zone.
The rupee had closed higher on Monday supported by a stronger Euro as global risk assets stabilised.
Indian equity markets too witnesses choppy traded on Tuesday; but it failed to improve rupee trade. Both BSE Sensex and NSE Nifty ended flat. The Sensex rose 21.74 or 0.13% to 16,438.58, while the Nifty index closed 4.45 points higher at 4,990. The Sensex closed over 100 points lower than the day's high of 16,554. Nifty's failure to hold on to the 5,000 mark is an indication of weakness.
Oil companies and corporates were seen buying the greenback, dealers said. Dollar demand from oil firms usually peaks towards the end of each month, as they need to pay their import commitments. Traders were also spotting bunched up outgoing corporate dollar remittances because Monday was a U.S. public holiday.
According to market expert Lancelot D'Cunha, CEO, Sharyans Wealth Management, Rupee could weaken again going forward. However, Pankaj Pandey, Head - Research, ICICIDirect.com, expects a correction in oil prices to ease pressure on the rupee.
RELATED STORIES Rupee weakens to 55.90/$ on dollar demand Rupee at 55.61 to dollar; biggest daily gain in three years Rupee at 8 day-high of 55.79 against dollar on EU agreement, GAAR Rupee flat, but stays below 57-mark against dollar Rupee falls to 57.11 to dollar, RBI intervention watched Meanwhile, Moody's said that significant depreciation of the Indian rupee is insignificant for India's sovereign credit. "Government foreign currency debt comprises only 7 per cent of total government debt and 5% of GDP. Most of it is owed to multilateral and bilateral creditors and has a maturity profile that keeps annual foreign currency repayments relatively low. Therefore, the direct effect of depreciation on the governments own debt repayment capacity is limited," Moody's said in a report.
The rupee has been depreciating to new lifetime lows on increased dollar demand from importers, especially oil refiners coupled with capital outflows from foreign funds. Even selling of the American currency by exporters and banks failed to check persistent fall.
Dollar has been appreciating against a basket of currencies worldover. Dollar Index has hit a 20 month high in trade, while Euro has been depreciating, down over 5 per cent this month against the US dollar and Yen.
According to Standard Chartered, Rupee may drag to 58.60 levels against the dollar on account of technical weakness. Morgan Stanley, however, expects rupee to cross levels of 60 and touch 62.70/$.
Meanwhile, Finance Minister Pranab Mukherjee said last week he is disappointed to see that the fluctuation of the Rupee against the dollar is increasing. "Sensex and Nifty figures are also disappointing. Brent crude price has also moved up, and the quantum of Indias imports is quite substantial, around $160 170 bn," he said.
He ascribed the rupee's precipitous slide over the past six days to the euro zone crisis and to the global slowdown, adding that the Indian stock markets as well as economic growth have been hit by the slowdown.
The rupee has now fallen more than 5 per cent this year against the dollar to make it the worst-performing Asian currency monitored daily by Reuters. It has dropped more than 13 per cent from its 2012 high reached in February
Why is Indian rupee weakening? This is a very important question in this current scenario. Not even Indian currency, all the Asian currencies are going down. They have started to doubt their strength.
What is the reason behind this? This is like a very talked about question. If, we try to find, we can easily find lots of reasons will come out.
If we compare the rupee with dollar it has come down at their 2 year low. The declining rupee is affecting the economy. Indian companies are losing huge chunks money. Many companies have recorded mark to market losses running on their foreign currency liabilities.
Indian reserve bank of India has started to sell dollars but it is not making any difference. Demand of dollar is so high that it is not easy to control their appreciation. Oil companies have to make their payment in dollars. They are making huge demand of dollar.
Leave this all these things; Reserve / central bank has no command over declining prices of rupee. The rupees saw their biggest fall in a decade on 16th September. It reached around 47 levels. It was the biggest single day fall in a decade.
The impact of weakening rupee share market is also in turbulence. Investors have started to think on strength of the economy.
When this weakness will come to an end, it is not very clear. But this is not an indication of a strong economy. People are in hope that it will take some time to be settled down.
If we will see the reality of whole economy, then we can understand the problem. The kind of volatility is being seen everywhere, means recession has come.
As rupee falls, IT companies under pressure to cut prices Mini Joseph Tejaswi, TNN Jun 29, 2012, 03.44AM IST
BANGALORE: Indian IT companies are coming under pressure from clients to renegotiate rates downwards for older projects and drop rates for new ones, given the gains that the vendors are making from the sharp drop in the rupee value against the dollar. Contract values are typically in dollars and those that were signed when the rupee was at, say, 45 to the dollar in August last year, would today deliver 26% higher revenues in rupees to Indian vendors, given that the rupee has fallen to that extent since then.
"Many global tech buyers are watching the day-to-day drop in the Indian rupee. Some already have asked for a 'cut' from the rupee windfall," said the CFO of a leading IT company who did not want to be named because his company is in the silent period ahead of its June quarter results. He said it would be tough for IT companies to resist such demands. "Some IT companies may be willing to share a part of the gains," he said. The CEO of a mid-sized IT firm said the buyers were asking for a share in the rupee gains because many of them were in deep trouble themselves on account of the slowdown/recession in Western markets. "If we don't give them a cut, they may not renew the contract or move to another vendor,'' he said. Analysts also believe customers would put pressure on tech vendors to drop prices and renegotiate contracts. Pradeep Udhas, executive director in consultancy firm KPMG, says this could pose a new challenge for tech firms. But he also says many of the vendors may be able to resist this demand by pinning their arguments on inflation. Inflation in India has for long been close to double digits, leading to all-round increase in costs, including for the IT vendors for whom much of the costs are in rupees. So the benefit from the rupee fall would be reduced to that extent, and the profit gains would not be as significant as the revenue gains. Hari Rajagopalachari, leader for the technology sector in consultancy firm PwC India, says the fundamental reason for the fall in the rupee is hyperinflation in India. "So the advantage we get from rupee depreciation will get neutralized in high inflation. Indian tech providers may well argue their case of inflation if they are asked to share their profitability with clients," he says.
India rupee touches new low vs dollar New Delhi/Agencies The Indian rupee touched a record low of 57.33 against the dollar in trading yesterday, amid global risk aversion and rising demand for dollars. The rupee opened the day at 56.80 to the dollar and plunged to an all-time low of 57.33 in afternoon trading. It recovered marginally to close at 57.12, down 1.47% from Thursdays close of 56.30 to the dollar. Analysts said increased capital outflows from equity markets and the rising demand for dollars from oil and gold importers were pulling down the Indian currency. Analysts and traders expect the domestic unit to hover around the level of Rs57-58 to the dollar throughout June amid signs of uncertainty in Indias fiscal and economic outlook, and renewed global risk aversion, the NDTV Profit channel reported. Reserve Bank of India Governor D Subbarao had said on Tuesday that the central bank would intervene in case of volatility in the foreign exchange market. The rupee has been falling for much of the year, after spending most of 2011 at between Rs44 and 45 to the dollar. It fell to Rs53 in December, before gaining strength to around Rs49 in February. Since then, it has plumbed ever lower depths against the dollar, with sharper declines since May. It has depreciated more than 10% since the start of April. In a bid to curb the currencys freefall, Indias oil secretary said the central bank had asked oil companies to buy half of their dollar demand from public sector banks, the Press Trust of India news agency reported. The rupee has been one of the hardest-hit currencies in Asia, reflecting investor concerns about Indias economy, which is being buffeted by high inflation and slow growth. The economy grew just 5.3% in January to March, its slowest quarterly expansion in nine years. The latest downward spiral in the rupee came after Moodys on Thursday downgraded the credit ratings of 15 of the worlds largest financial institutions, including Goldman Sachs and Barclays, citing risk exposure and the eurozone crisis. Risk appetite is reducing at a very fast pace, said D K Joshi, chief economist with ratings agency Crisil. The rupee trend will reverse once things stabilise in advanced countries, he said. At these levels the Indian market will start looking quite attractive. The rupee also faced a string of unprecedented lows last month, highlighting the economic drift in the once-booming Asian giant, which is also suffering from troublesome fiscal and current account deficits and a stalled reform agenda. New tax policies seen as hostile to foreign investment have added to the gloomy climate.
The Indian rupee feII to its Iowest ever against the doIIar yesterday Ratings agency Standard & Poors warned this month that India could be the first of the Brics emerging economies which also includes Brazil, Russia, China and South Africa to lose its investment-grade debt classification unless it revived growth and rekindled its reform programme. Fitch Ratings also downgraded Indias credit outlook from stable to negative on Monday, saying the countrys growth potential will deteriorate without a quickening of structural reforms. Meanwhile, Indian equities retreated for the first time in four days after the rupees record fall and after reports showed the US economic recovery is slowing. The Sensex has dropped 8% from its Feb. 21 high. The S&P CNX Nifty Index on the National Stock Exchange decreased 0.4% to 5,146.05 and its June futures settled at 5,151.15. India VIX, a gauge of options prices in the Nifty, jumped 3.2% to 20.58, its first advance in six days. The BSE-200 Index retreated 0.3% to 2,082.68. Combined trading volume on Indias top two exchanges was 749mn shares on Thursday, 17% less than the 12-month daily average of 904mn. The economy is going to struggle over the next six to nine months because growth and the deficits are a concern as the rupee continues to weaken, Jyotivardhan Jaipuria, head of India research at Bank of America Corp, said in an interview to Bloomberg UTV yesterday. Rupee depreciation is not something you want if you are a foreign investor because it reduces your return in a market where returns are difficult to come by.
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