Rupee falls most in 2 months, ends at 62.39 against dollar
The partially convertible rupee closed at 62.39 per dollar compared with 61.62 on Tuesday. It fell to an intra-day low of 62.40, its lowest since October 2.business Updated: Nov 06, 2013 17:54 IST
The rupee fell the most in over two months on Wednesday, on sustained dollar demand from state-run banks, leading to speculation that they were buying on behalf of oil refiners.
The partially convertible rupee closed at 62.39 per dollar compared with 61.62 on Tuesday. It fell to an intra-day low of 62.40, its lowest since October 2.
The Reserve Bank of India has been directly providing dollars to state-run oil firms via a dollar swap facility since late August, taking an estimated $300-$400 million off daily market trading.
When will these oil firms resume their dollar purchases in markets has been a topic of speculation in recent days. The central bank has said it will gradually withdraw the oil window as the rupee stabilises, but has not indicated a timeline.
Bank of America-Merrill Lynch said in a note that the central bank should start tapering its dollar swap facilities as it has already been priced in by markets and it would be hard to continue to fund net oil imports that average $8-$10 billion a month.
"The RBI cannot keep the oil window open indefinitely. The central bank may start slowing it to test the waters," said Subramanian Sharma, director at Greenback Forex.
The rupee fell 1.2%, its biggest single-day drop since Sept 3.
The rupee was also pressured as local stocks fell for a second day, with the benchmark BSE index ending down 0.4%, retreating further from a record high hit on Sunday.
In the offshore non-deliverable forwards, the one-month contract was at 63.01, while the three-month was at 64.06.