Rupee slips on dollar demand

Customary month-end dolar demand despresses the Indian currency despite US unit's weakness against other major currencies.

The rupee eased on Tuesday on customary month-end dollar demand from importers, and even the US unit's weakness against other major currencies could not prop it up.

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The rupee weakened to 46 per dollar in early trade, but recovered slightly on some dollar sales by state-owned banks, said dealers. The rupee had strengthened past this level on September 20.

At 10:00 am, the rupee traded at 45.98/99 per dollar, down from the previous close of 45.93/95. Robust capital flows in recent weeks have propped up the rupee, helping it recover 2.5 per cent from a three-year low of 47.04 in July.

"There was dollar demand from the very start of trading. Buyers prefer the month-end to stock dollars and also hedge in the forward market by buying contracts," said a dealer with a private bank.

Dealers said there was dollar demand from gold traders, who want to import gold in anticipation of the festival demand for the yellow metal in October.

Oil companies were also buying dollars. US oil traded around $61.5 per barrel, after easing to six-month lows below $60 a barrel on Monday.

The US Federal Reserve held rates steady last week for a second consecutive meeting, having raised rates 17 times over two years from mid-2004.