MUMBAI: The rupee hit its lowest level in more than two weeks on Friday morning, tracking a sharp drop in the domestic stock market, but some dollar selling emerged from exporters helping prevent a further decline.
At 11:40 a.m. (0610 GMT), the partially convertible rupee was at 46.16/17 per dollar, weaker than its close of 46.04/05 on Thursday. The unit fell as low as 46.2750 in early deals, its lowest since Jan. 5. "The market is panicky due to global equity markets going haywire. However, 46.30-32 levels look like the top-side for the dollar-rupee today," said Naveen Raghuvanshi, an associate vice president, at Development Credit Bank.
"The medium-term trend is still bullish for the rupee, the unit is unlikely to breach the 46.50 mark in the near or medium term," he added.
Dealers said some trimming of losses in the local stock market helped the rupee recover from the day's lows along with some exporters selling dollars.
Traders now await the central bank's policy review on Jan. 29 for cues on interest rate moves.
"No rate hike is expected at the policy, even a reserve ratio hike seems unlikely, but if there are any hikes, the knee-jerk reaction would be rupee negative," Raghuvanshi said, adding that the longer term would still be positive.
Economists are widely expecting the central bank to raise at least banks' cash reserve requirement at the review, but are equally divided on the possibility of a rate hike.
A recent poll conducted by Reuters shows the rupee is expected to rise to 43 per dollar by end- March 2011.
Traders were also eyeing the dollar's index against six major units, which was down 0.2 per cent, for cues on the unit's move against majors. The dollar's softening was helping avert further fall in the local unit.
Indian shares were trading down just about 1 per cent after having dropped over 2 per cent earlier, after sharp falls in global markets.
Foreign fund investments into local shares are a key factor fuelling the rally in stocks as also the rupee. Foreigners have bought a net $1.6 billion so far in 2010, adding to the net purchases of over $17 billion last year.
One-month offshore non-deliverable forward contracts were quoted at 45.26/36, little weaker than the onshore spot rate.
In the currency futures market , the most traded near-month contracts on the National Stock Exchange and MCX-SX were both quoting at 46.1750, with the total traded volume on the two exchanges at about $2.1 billion.
Source : The Economic Times