Rupee hits three week low

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Reserve Bank of India’s (RBI) growth concerns, month-end dollar demand from importers and outward remittance from corporates dragged down the rupee by a whopping 106 paise to three-week low of 60.47, wiping out all the gains notched up on central bank’s recent liquidity tightening steps.

The steep fall in rupee came on a day when the RBI in its first quarter review of monetary policy kept all key rates unchanged but cut the GDP growth forecast to 5.5 per cent for FY’14 from 5.7 per cent earlier.

At the Interbank Foreign Exchange (Forex) market, the local unit opened lower at 59.62 a dollar from previous close of 59.41. It tried to recover to a high of 59.52 only to fall back to a low of 60.55 after the RBI policy trickled in.

Rupee later closed at 60.47, showing a fall of 106 paise — the biggest fall in last one month — or 1.78 per cent.

“There was some position cutting at 59.70-75 levels. A huge outward remittance from a corporate was also seen which kept rupee under pressure. Beyond 60 levels, panic buying from importers started,” said a chief dealer with a PSU bank.

RBI had come out with a series of steps, including those to drain excess cash from the financial system, after rupee plunged to all-time low of 61.21 on July 8. Monday, rupee had closed at 59.41.

RBI’s dovish view on the coming quarters and lowering of GDP forecast also weighed on rupee. Investors are concerned about the recent liquidity measures that the central bank on Tuesday said will only be withdrawn once rupee stabilises, said a senior treasury official at another state-owned bank.

Meanwhile, chief economic adviser Raghuram Rajan Tuesday said that government will announce some measures in the next few weeks to contain CAD and stabilise rupee.

The Indian benchmark S&P BSE sensex Tuesday tumbled by 255 points, or 1.25 per cent even as FIIs pumped in 256.45 crore Tuesday as per provisional data with stock exchanges.

The dollar index was up by 0.03 per cent against its major rivals ahead of US Federal Reserve’s policy meeting starting later in the day.