Rupee snaps five days of gains; export growth slows
In line with the stock market, the rupee dropped by 28 paise to 61.32 against the dollar in late morning trade on Wednesday on fresh demand for the US currency from banks and importers.business Updated: Dec 11, 2013 17:24 IST
The rupee fell on Wednesday, snapping a five-session winning streak, as the pace of exports last month slowed, raising some concerns about the economy despite a trade deficit that narrowed after gold and silver imports slumped.
The partially convertible rupee closed at 61.24 per dollar compared to 61.04 on Tuesday. Dealers also cited large dollar buying by a state-run bank, likely for state-run oil refiners.
The country's merchandise deficit narrowed to $9.2 billion in November, but exports growth eased to 5.9% from 13.5% in October, government data showed.
The exports data came on a day when Reserve Bank of India governor Raghuram Rajan said inflation remained a priority despite noting it was too early to call a bottom in the economy.
India is due to post consumer inflation data on Thursday amid worries a high reading could spur the central bank to raise interest rates next week for the third time in four months, denting growth and hitting domestic shares.
"We expect even better data, and believe that the results are not good enough to support the INR, because the trade gap is still a huge 6.1% in monthly terms and 9.0 % of GDP in 12-month rolling terms. Moreover, the data underestimates the actual deficit," said Dariusz Kowalczyk, a Hong-Kong based
strategist at Credit Agricole CIB.
Some concerns were also sparked after Standard & Poor's said India's ratings may be pressured if the next general elections due by May end with a hung parliament or with a government unable to push through reforms.
The rupee has gained 2.1% over its past five sessions through Tuesday primarily on the back of the strong electoral showing by the key opposition party which is perceived to be business-friendly.
In the offshore non-deliverable forwards, the one-month contract was at 61.62 while the three-month was at 2.50.