Rupee hits 6-week low on import payments, shares.

MUMBAI: The rupee slipped to a six-week low on Monday weighed by persistent dollar demand from importers for oil payments as well as defence equipment purchases and weak local shares.

But, dealers expect the local currency to find support from dollar sales by exporters and possibly the Reserve Bank of India, whose policy is to smoothen sharp volatility in the rupee.

The rupee ended at 49.835/845 to the dollar, after dipping to 49.9550, a level last seen on January 25, Thomson Reuters data showed. The currency closed at 49.50/51 on Friday.

"Global sentiment is weak and oil prices may stay under pressure," said Naveen Raghuvanshi, associate vice president of foreign exchange trading at Development Credit Bank. These two factors could keep the demand for dollars strong.

Negative local stocks and subdued risk appetite in global financial markets due to a slowing Chinese economy and the risks surrounding Greece's debt crisis weighed on the rupee.

India imports more than 80 per cent of its oil requirements to fuel its economy, the third largest in Asia, thereby making the local oil refiners the biggest buyers of dollars in the domestic currency market. For stories on oil, see

"But the rupee is expected to witness strong support around 50 levels," Raghuvanshi said.

Dealers said the RBI may have sold dollars through state-owned banks above 49.90 levels to help limit the rupee's slide on Monday. However, this can be confirmed only after the RBI releases its data on forex intervention, after around 45 days.

The central bank has actively intervened in the local currency market over the last few months, selling dollars while simultaneously resorting to a flurry of steps aimed at cutting speculation and improving dollar inflows.

In December, the RBI sold more than $9 billion in the spot and forwards markets, its biggest intervention in nearly three-and-half years, data released by the RBI in February showed.

Shares logged their lowest closing level in more than a month on Monday on worries that a lower-than-expected showing by the Congress party in a key state poll could hamper any move by the Congress-led federal government to revive stalled reforms.

The one-month offshore non-deliverable forward contracts were at 50.28. In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 50.16, on a total volume of $4.7 billion.

Source : timesofindia.indiatimes.com