Rupee falls to another record low of 58.40 - Times of India

The author has posted comments on this articleTNN | Jun 12, 2013, 06.38AM IST MUMBAI: The rupee neared levels of 59 against the dollar on Tuesday before intervention by the Reserve Bank of India through public sector banks pulled the domestic currency back to close at 58.40 - another record low and down 25 paise from its previous close. RBI also ordered all exporters in Special Economic Zones to repatriate full value of exports within a period of 12 months from date of export. Earlier, there was no time limit for repatriating proceeds of exports from SEZs. Dealers said that although RBI appears to have sold dollars through some public sector banks, there was no major intervention. "The recovery from 58.98 was so sw ift that it appeared that there was not much of dollar demand at the higher level. There is a view that the rupee has breached its fundamental levels while the weakening has been stemmed, it might take some major action for the rupee to reverse it movement," said Harihar Krishnamoorthy, treasurer, First Rand Bank. He added that there has been some buzz in the market of a dollar bond by the government. According to bankers, RBI has not come out with sledgehammer measures to stamp out volatility because dollar has been gaining against currencies globally. "Even in other Asian countries like Malaysia, Thailand and Indonesia, there has been a currency rout," said Krishnamoorthy. According to dealers, one of the reasons why the rupee has been hit harder than other emerging markets has been the sell-off in the bond markets. "Conventional wisdom is that if you have a large current account deficit, you raise interest rates," said a banker. The sell-off in the bond markets has raised fears that RBI may hike rates in its mid-quarter review on June 17. Fears of currency-related losses for corporates and an interest rate hike led to the sensex falling 1.53% on Tuesday. While the sharp fall in the value of the rupee has taken traders by surprise, there is no panic in the market. Some bankers feel that there is some irrationality in funds moving back to US treasuries as it is u nlikely that the US Federal Reserve would withdraw the fiscal stimulus immediately. "In a few days in June, the rupee has depreciated over 4% against the dollar and more so against the other currencies like euro and pound. Fear that the US will unwind its quantitative easing programme and overly short positioning in dollars could have the reason behind the move. A weak rupee does not augur well for corporates who have unhedged foreign currency loans or large concentration of net imports. Over the near term, we could see a range bound action in USD/INR between 57.50 and 59.00, as recent spate of depreciation has been too fast and a consolidation is warranted ahead of the US Fed meeting on 19th of June," said Anindya Banerjee, Currency Analyst, Kotak Securities. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNGBcci9j29OsBsJMS4zwR6WZZWRpw&url=http://timesofindia.indiatimes.com/business/india-business/Rupee-falls-to-another-record-low-of-58-40/articleshow/20549498.cms

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