Rupee posts weekly loss of 0.8%; closes at 55.73 against dollar

Mumbai: The rupee surrendered most of its last week's gain and depreciated by 45 paise to end the shortened week at 55.73 against the Greenback following fresh dollar demand from importers and some banks amid firm dollar overseas after mid-week.

However, sustained capital inflows and firm local stocks restricted the rupee fall to some extent, a forex dealer said.

The Forex market was closed on August 15, 2012 for observing 'Independence Day'.

At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed slightly better at 55.25 a dollar from last weekend's close of 55.28 and improved further to a high of 55.19 on Monday on sustained dollar selling by exporters and continued capital inflows, while weak dollar overseas also helped the rupee to firm up at early stages.

However, it turned weak on dollar demand from importers, mainly oil refiners, at the fag-end of Monday's trading and remained in negative terrain till Thursday.

It crossed the 56-mark to an intra-trade low of 56.04 on Thursday after nearly two-week before concluding at 55.73, showing a fall of 45 paise or 0.81 percent.

The Indian benchmark Sensex closed up by over 133 points, or 0.76 percent, extending gains for the third straight week.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, "The beginning for INR was flat to firm note but turned into weakness towards the mid week and ended on weak note. The week witnessed some major economic numbers from India hitting the market except the WPI numbers all infused sheer disappointment.

"The July WPI numbers beat the expectations and came in at 6.87 percent against the hopes of of 7.30 percent which eased some of the pressure on RBI but dwindling exports at a faster pace than imports resulted in the widening of the July trade deficit to USD 15.5 billion against USD 14.8 billion YoY."

"The process of revising the growth forecasts lower has been official now after the Economic advisor to PMO and the Centre for Monitoring Indian Economy (CMIE) scaled down FY13 GDP growth forecast to 6.7 percent on poor monsoon.

"A deficient monsoon is expected to pull down farm sector growth rate to 0.5 percent in 2012-13. In such a bleak economic situation the INR maintained its strengthening stance on the back of positive cues from global markets.

"The rising foreign capital flows has been negating the weakness in INR due to poor economic performance supported by abundantly available liquidity seeking avenues for risk on investments," he added.

"For the coming week Importers can wait for the INR to appreciate around 54.50 - 55.00 levels for partial hedging for their payments which we expect to be achieved on a move below 55.30 levels.

"A complete long Hedge can be created around 54.00 levels for medium term payments. Exporters can use the weakness towards 56.30 levels to initiate a short hedge with a stop loss above 57.00 levels as to cover their receipts.

"The crucial levels for INR appreciation are 55.30 levels as a move below the same shall extend gains and for depreciation the 56.70 levels can be closely watched as rise above 56.70 levels shall weaken the pair till 57.20 - 58.00 levels," he added.

Abhishek Goenka, Founder & CEO, India Forex Advisors said," Rupee has entered into a new normal and may remain in the broad range of 53.50-60 levels in 2012-2013. The fundamentals have gone structurally weak for Asian markets due to a slowdown in US, Europe, UK and China.

"The fiscal deficit and supply side inflation pressures may elevate incase we do not see any concrete government action. The BOP numbers may turn alarming if we cannot rope in permanent capital soon.

"The local pair may also remain weak for most of the year since that would be a significant tool to rope in more flows and promote exports on similar lines of Japan, Korea in 70's and China in the 90's -2000 who also maintained artificial weakness to promote exports".

The RBI fixed the reference rate for US dollar and euro at Rs 55.7023 and Rs 68.8510 from Rs 55.3440 and 68.0425 last weekend, respectively.

The rupee premium for the forward dollar ended mixed on alternate bouts of buying and selling.

The benchmark six-month forward dollar payable in January closed lower at 171-173 paise from last weekend's level of 176-178 paise, while far-forward contract maturing in July finished slighly higher at 326-328 paise from 325-327 paise last weekend.

The rupee fell back sharply against Pound Sterling to close the week at 87.48 from preceding weekend's close of 86.25 and also dropped against the euro to 68.88 from 67.81.

However, it moved up further against the Japanese yen to 70.17 per 100 yen from last weekend's level of 70.48.