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Early Christmas sales by FIIs?

business Updated: Oct 23, 2008 22:52 IST
HT Correspondent
HT Correspondent
Hindustan Times
Early Christmas sales by FIIs?

The Rupee fell to its lowest ever on Thursday and market watchers expect it to breach the Rs 50 mark to the US dollar in a couple of days. The depreciating rupee is expected to force foreign institutional investors (FIIs) to advance the usual pre-Christmas sales to ensure they repatriate more dollars home, especially in the current mood of global economic uncertainty.

The more the rupee depreciates, the less FIIs would get in dollars when they convert the Indian currency into the greenback to take back the money home. The FIIs would, therefore, prefer to sell a part of their holdings sooner as much as they can so that they get more dollars than when the rupee falls further, market analysts say.

The rupee closed 1.1 per cent down at Rs 49.82 per dollar on Thursday after touching a record low of Rs.49.86 in early trading. The rupee has fallen about 20 per cent in 2008. It may fall to Rs 52 per dollar by the end of 2008, according to Barclays Bank.

The dollar's strength overseas is adding to the pressure on the rupee. The dollar touched a two-year high against major global currencies on concerns about worsening global economic conditions.

During 2008-09, the rupee moved in the range of Rs 39.89-49.82 per dollar. The rupee continued to depreciate beginning April 2008, reflecting FII outflows, bearish stock market condition, high inflation and higher crude oil prices reflecting higher demand for dollars, according to the Reserve Bank of India.

“Nobody allows (the rupee) to fall, nobody allows it to rise. The rupee rises, falls depending upon the demand for foreign exchange,” Finance Minister, P Chidambaram, said in New Delhi.