Surging demand for dollars pushes currency down to 43.71 to a dollar.
Hit by an acute dollar shortage in the foregn exchange market today, the spot rupee lost 19-20 paise to reach an intraday low of 43.86 against the greenback in the first half of the trading session. Towards the end, the spot rupee recovered to close at 43.70-71 to a dollar.
According to dealers, foreign institutional investors (FIIs) continued to pull out of the equity market even as the BSE Sensex gained 135 points on Wednesday.
Dealers said while foreign investors were exiting the Indian markets for better returns in the West Asian and overseas markets, domestic players like insurance companies and mutual funds continued to remain major buyers in the domestic equity market.
According to dealers, while foreign banks on behalf of their FII clients continued to buy dollars, the supply was ensured from exporters, who were selling their dollar receivables for the near term (one to three months) to take advantage of the depreciating spot rupee.
The Reserve Bank of India (RBI) also remained one of the major sources of dollar supply. It sold the greenback in the spot market with an underlying agreement to buy it back in the forward market from banks besides the outright sale of dollars. This measure is to ensure depletion of foreign exchange reserves since the sale of dollars today will be replenished by dollar sales by exporters or other players in the forex market at a future date, said a dealer.
Dealers also attributed a strengthening dollar overseas to the weakness in the rupee weakening. The dollar has been gaining due to a weakness across global currencies. “If the rupee continues to depreciate in this manner, the spot rupee may touch and even breach the 44 mark to a dollar in the beginning of the next week,” said a dealer.
Besides FIIs, oil companies also continued to buy dollars, fearing a fast depreciation of the rupee.
The premium on the forward dollars declined today as both exporters and RBI were selling dollars in the forward market, thereby pushing up the rupee premia. FIIs and oil companies, on the other hand, were buying dollars from the spot market. The annualised premia for six-month and one-year forward dollars closed lower at 3.12 per cent and 2.70 per cent today as against 3.45 per cent and 2.93 per cent on Monday respectively.
Hit by an acute dollar shortage in the foregn exchange market today, the spot rupee lost 19-20 paise to reach an intraday low of 43.86 against the greenback in the first half of the trading session. Towards the end, the spot rupee recovered to close at 43.70-71 to a dollar.
According to dealers, foreign institutional investors (FIIs) continued to pull out of the equity market even as the BSE Sensex gained 135 points on Wednesday.
Dealers said while foreign investors were exiting the Indian markets for better returns in the West Asian and overseas markets, domestic players like insurance companies and mutual funds continued to remain major buyers in the domestic equity market.
According to dealers, while foreign banks on behalf of their FII clients continued to buy dollars, the supply was ensured from exporters, who were selling their dollar receivables for the near term (one to three months) to take advantage of the depreciating spot rupee.
The Reserve Bank of India (RBI) also remained one of the major sources of dollar supply. It sold the greenback in the spot market with an underlying agreement to buy it back in the forward market from banks besides the outright sale of dollars. This measure is to ensure depletion of foreign exchange reserves since the sale of dollars today will be replenished by dollar sales by exporters or other players in the forex market at a future date, said a dealer.
Dealers also attributed a strengthening dollar overseas to the weakness in the rupee weakening. The dollar has been gaining due to a weakness across global currencies. “If the rupee continues to depreciate in this manner, the spot rupee may touch and even breach the 44 mark to a dollar in the beginning of the next week,” said a dealer.
Besides FIIs, oil companies also continued to buy dollars, fearing a fast depreciation of the rupee.
The premium on the forward dollars declined today as both exporters and RBI were selling dollars in the forward market, thereby pushing up the rupee premia. FIIs and oil companies, on the other hand, were buying dollars from the spot market. The annualised premia for six-month and one-year forward dollars closed lower at 3.12 per cent and 2.70 per cent today as against 3.45 per cent and 2.93 per cent on Monday respectively.
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