Rupee falls 17% in six months

The rupee, which has depreciated by more than 17 per cent in the last six months, may continue to be under pressure against the US dollar as no major improvement in foreign fund flow is expected in the near future, say bankers and analysts.

On Friday the rupee closed at the five-year low of 47.08 a dollar as there has been heavy demand for the US currency in the local forex market.

If the current demand-supply mismatch continues, dealers said, the rupee could soon touch the 48 level. Dollar supply is unlikely to improve in the near future, given the dimension of current global financial crisis. The forward dollar premium came down to below one per cent last week, they said.

Since April, the Indian currency has weakened by Rs 7 against the dollar.

Foreign institutional investors continue to be net sellers in the Indian equity market. They have sold equities worth more than $6 billion in the last six months. India's forex reserves have declined by around $4 billion in the last one month.

The sustained rupee depreciation was also accompanied by increased volatility in the forex market. The rupee's intra-day movement has been in the range 20-50 paise, on an average, said dealers.

There has been a considerable decrease in offshore dollar supplies since April. Since the sub-prime crisis there has been huge flight of capital from India. The domestic currency is expected to remain under pressure for some more time. It could touch 48.50 by next month against the greenback before strengthening again to stabilise around the 45-mark, said Mr Moses Harding, Executive Vice-President, Head-Global Markets Group, IndusInd Bank.

Dealers say the strong dollar demand from oil companies and importers will continue to put pressure on the rupee.


Source: HinduBusinessLine