Re closes at new low of 56.24; down 57 paise

With dollar emerging as a safe haven for global investors getting restive on fresh Eurozone worries, rupee further lost 57 paise on Wednesday closing at a new low of 56.24 despite RBI efforts to prop it up.

While the Indian foreign exchange market was following the global cues, the situation for rupee aggravated amid sustained month-end dollar demand from importers.

In the last two days, rupee has lost 106 paise.

Its earlier record low was on May 23 when it closed at 56.

After opening weak, the rupee today soon breached the key 56-mark as the American currency strengthened with reports saying the Bank of Spain expects the nation's economy to sink deeper into a recession.

With the euro falling to the lowest level since July 2010 and continued dollar buying by importers to meet their month-end bills, the rupee finally closed at 56.24.

Experts said if RBI hadn't intervened today, the rupee could have approached its record low of 56.38 hit on May 24.

"As dollar strengthened against other currencies today, it had its reflection on the rupee. However, if it was not for the central bank's intervention today, the rupee would have fallen further," said Moses Harding, Head- ALCO and Economic & Market Research, IndusInd Bank.

According to Abhishek Goenka, CEO, India Forex Advisors, the rupee will remain under pressure on the Eurozone issue.

On Tuesday, Egan-Jones Ratings cut Spain's credit level, the third downgrade from the agency in less than a month.

"The third downgrade (for Spain) from the rating agencies in less than a month has made investors cautious about any hopes that the issue will be resolved soon in Spain," he said.

The rupee has lost over 6 per cent this month, the worst performance in Asia, driven by a combination of deteriorating global sentiment and weak domestic fundamentals.

Meanwhile, the Indian benchmark Sensex on Wednesday dipped by 126.43 points or 0.77 per cent.

The dollar index, a gauge of six major currencies was up by over 0.1 per cent and the New York crude oil was trading above $89 a barrel in European market on Wednesday.

The growing concern over Euro Region with up-coming Greece re-election and rejection of the Bankia's (fourth biggest lender in Spain) bailout application by the ECB continue to make the investors worried about the global markets.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said,"The rupee once again raced towards its historical lows on weakening global currencies which broke the supports and headed lower.

The Euro tested nearly two-year low below $1.25 where as the GBP tanked in below 1.5600 to 1.5550 levels".

According to Hemal Doshi, Chief Currency Strategist, Geojit Comtrade, the rupee may breach Rs 57 level if the fall continues on Thursday.

Experts feel that RBI measures to stem rupee's slide have not shown encouraging results so far.

"Yesterday, the central bank said that it will allow the qualified foreign investors (QFIs) to invest up to $1 billion in corporate debt bonds, to attract more foreign flows into the Indian markets. However, these actions were not  sufficient enough to prevent the rupee's fall," said Goenka.

The premium for the forward dollar on Wednesday recovered on fresh paying pressure by banks and corporates.

The benchmark six-month forward dollar premium payable in October rose to 144-145 paise from yesterday's close of 140-142 paise and far-forward contracts maturing in April also shot up to 288-290 paise from 259-260 paise.

The RBI fixed the reference rate for the dollar at 56.0060 and for euro at 69.8495.

The rupee dropped further against the pound sterling to 87.75 from overnight close of 87.23 and also declined to 70.04 per euro from 69.87.

It plunged against the Japanese yen to 71.11 per 100 yen from last close of 70.00.

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