Rupee closes at 10-week low amid weak equities

The rupee fell below 63-mark to log its 10-week closing low of 63.10 against the Greenback due to turmoil in local equities following sharp sell-off in global markets triggered by possibility of US tapering.

Sustained dollar demand from importers, mainly oil refiners, to meet their month-end requirements amid fresh capital outflows also weighed on the rupee, a forex dealer said.

Hopes of cutting their bond-buying programme by another $10 bn in the two-day monetary policy meeting starting January 28 by US Federal Reserve, mainly kept the rupee under pressure on fears of squeeze in global liquidity.

At the Interbank Foreign Exchange (Forex) market, the local currency commenced sluggish at 62.84 a dollar from last Friday's close of 62.66, but tried to recover to a high of 62.6525 after Economic Affairs Secretary Arvind Mayaram said that there is no need to worry about rupee's decline as "economic fundamentals are very strong.

However, it fell back sharply to a low of 63.32 before concluding at 63.10, a net fall of 44 paise or 0.70 pct.

Previously, it had closed at 63.11 on November 14, 2013.

In straight three sessions, it has slumped by 129 paise or 2.09 pct.

The benchmark S&P BSE Sensex on Monday tanked by over 426 points or 2.02 pct to end at three-week low of 20,707.45 while FIIs pulled out $31.45 mln Friday, as per Sebi data.

The dollar index recovered its initial losses and was trading almost stable against a basket of six major rivals.

Mr. Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said,"Today also Rupee continued to depreciate ahead of the central bank's policy review. It has weakened for the seven out of eight days. The trading range for the spot USDINR pair is expected to be within 62.80 to 63.80." .

"It has been a tiring session for the market participants as the downfall in the stock market as well as rupee made them nervous. Rupee was seen breaching another key level of 63.00 against the USD amid sell off in the global stock markets and weak Asian currencies. Main driver behind a fierce fall in the currency was the rising expectations that the Fed will taper their ongoing QE by $10 bn on 29th January, 2014. Going ahead, markets will be keenly waiting for the comments and action by the RBI Governor as he unveils the monetary policy tomorrow," said Mr. Abhishek Goenka, Founder and CEO, India Forex Advisors.

Forward dollar premiums ended steady to better on stray payments from banks and corporates.

The benchmark six-month forward dollar premium payable in June closed at its last Friday's level of 213.5-215.5 paise.

Far forward contracts maturing in December, however, rose further to 459-461 paise from 457-459 paise.

The RBI fixed the reference rate for the dollar at 62.7145 and for the euro at 85.8228.

The rupee declined further to 104.39 against the pound from 103.92 previously and also remained weak to end at 86.32 per euro from 86.00. It softened to 61.50 per 100 Japanese yen from 61.41.