The rupee lost further ground against the US dollar on Friday following increased demand for the greenback from importers. The dollar also strengthened in the overseas markets against the euro and other currencies after central banks in China, Europe and UK announced fresh monetary easing.
The European Central Bank's rate cuts increased the demand for the dollar from importers, particularly oil companies.
India’s rupee fell the most in two weeks today. The local currency pared this week’s gain after the ECB President Mario Draghi avoided questions on further monetary easing, after reducing the benchmark rate to a record low 0.75% and the deposit rate to zero.
The rupee ended at 55.45 per dollar after being as low as 55.64 and as high as 55.33. It had opened at 55.40 against its Thursday close of 54.95.
The rupee touched a weekly low of 55.91 and a weekly high of 54.17. It had closed at 55.63 on June 29.
Local stocks closed lower, tracking weakness in Asian markets and jittery European markets.
The Sensex ended at 17,374, down 17 points or 0.1% from the previous close. It had earlier touched a day’s high of 17,554 and a day’s low of 17,425. It opened at 17,546.
The NSE Nifty settled at 5,316, down 10 points or 0.2% over the last close. It touched a day’s low of 5,287 and day’s high of 5,327. It opened at 5,324.
The rupee had rallied more than 5% in the four sessions ended July 3, sparked by hopes of positive movement on important policy issues. However, it is still down over 10% from its 2012 high, reached in early February.
It has strengthened on the back of clarity on GAAR and encouraging measures announced by the European leaders at the recent EU summit to tackle the long-running credit crisis.
On the domestic front, sentiment has improved after Prime Minister Dr. Manmohan Singh took additional charge of the Finance Ministry.
According to rating agency CRISIL, there is a 66% chance that the rupee appreciating to ~50 per dollar by March-end 2013.
However, rival Fitch Ratings has warned that the rupee was not likely to appreciate in the short term until global risk aversion subsides. Fitch sees the rupee falling further if global risk aversion worsens or the domestic fiscal position deteriorates.