Rupee tumbles, at Rs13.80 to Dh1

The Indian rupee fell for a third consecutive day this morning as hopes of an interest rate cut in the country fade.

The rupee fell to a two-week low of Rs13.79 to one UAE dirham at 8.20am UAE time (4.20 GMT) this morning, March 21, within a whisper of its March 7 high of Rs13.80 to Dh1.

Experts maintain the Indian currency could tumble further during the day as oil importers will need a continuous supply of dollars to fund their purchase.

Even as the oil price retreated 1 per cent yesterday on Saudi Arabia’s assurance to keep the supply taps on in case of a disruption in Iranian supplies, they are still up almost 16 per cent year-to-date, something that is squeezing oil importers and putting downward pressure on their currencies.

Increased uncertainty about the Reserve Bank of India’s policy rate cut is affecting India’s stock markets negatively and even the rupee. The Indian rupee is currently trading at Rs50.65 to $1, and with the greenback gaining momentum in the recent past, these levels are likely to remain steady.

Nevertheless, analysts maintain that, in the short term, the rupee is unlikely to drop or surge from the current levels in the absence of an external trigger.

“Technically, the USD/INR remains in an uptrend and our upside targets for the week are at 50.76 [Dh13.82],” Subhash Gangadharan, currency analyst at Mumbai-based brokerage house HDFC Securities, said in his weekly report yesterday.

Click here to read: Rupee at 50 to the US dollar in Q2

He expects the higher gold duty, introduced by India last week in its annual budget for fiscal 2012-2013, is likely to be positive for the rupee due to the record level of gold imports by the country.

“Higher import duty on gold products would be positive for the rupee, as during the current fiscal year gold imports crossed $50 billion, thereby adding to the pressure on the rupee from a growing oil import bill,” he said.

However, while the budget proposals may give the beleaguered rupee (it was the worst performing major Asian currency last year), a strengthening dollar will continue to trouble it. “On the whole, Budget 2012, with a focus on fiscal consolidation, may provide some support to the rupee going ahead. Otherwise, the rupee is under pressure from a strengthening dollar and rising oil prices,” Gangadharan said.

The one scenario in which rupee could muster strength in the short term is if global equities gain momentum and in turn pressure the US dollar. “In the coming week, price action in the USD-INR pair would be dependent on the greenback’s overall strength, which in turn is dependent on risk appetite trends. If equities continue to climb on the outlook of firmer growth and stable and low rates, then a low-yield greenback is likely to weaken.”

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