Rupee down to near 3-month low; more depreciation seen
Reuters: The rupee fell to a near three-month low on Tuesday due to dollar demand from importers and equity outflows, with the market expecting downward pressure to continue ahead of festival import demand in April, dealers said.
The spot rupee ended at 131.05/08 per dollar, its lowest since 3 December, and a tad weaker from Monday’s close of 131.00/10.
Dealers said one of the two State banks, through which the Central Bank usually directs the market, defended the rupee by selling dollars at 131.05. Some dealers said the spot rupee was capped at 131.05.
Dealers said the depreciation would not go out of proportion as the Central Bank has the muscle to defend the rupee with strong reserves.
“There were importer and equity outflows. But it didn’t go beyond 131.05,” a currency dealer said.
Dealers expect the rupee to gradually depreciate to 131.60 by the end of the first quarter due to seasonal imports.
On Thursday, the currency breached the 130.85 level, which dealers said the Central Bank had been defending for two months through buying and selling of dollars via two State banks.
The rupee has also been under pressure due to foreign outflow from equities and Government securities in the past two weeks, data showed.
Foreign investors had sold a net Rs. 2.32 billion worth of Government securities in the week ended 19 February, while they dumped Rs. 5.41 billion in stocks in the 13 straight sessions through Tuesday.
The rupee has gained about 3.16% since it hit a record low of 135.20 on 28 August last year. It lost 2.5% in 2013.