Rupee hits fresh 11-month low; may head towards 57

31 May, 2013,NEW DELHI:--



The rupee continues to reel under pressure for the fourth consecutive day, hitting a fresh 11-month low on Friday, after RBI governor\'s comments made yesterday dented rate cut hopes



The comment on Thursday pointed to the fact that inflation still remained high and expressed worry over the country\'s high current account deficit.



The sentiment turned bearish on concerns that the RBI may not cut rates at its next policy review meet in June.



The rupee was trading at 56.47/48 versus its close of 56.38/39 on Thursday after hitting as low as 56.60 in opening deals, its weakest since June 29, 2012, Reuters reported.



\"The rupee was seen continuously weakening against the US dollar in this week due to increased dollar demand in the local market,\" India Forex said in a report.



\"The rupee was seen posting losses hitting 10 month low on Thursday toward market close after the RBI comments dented the rate cut hopes,\" said the report. His comments sent the bond yields to a two-week high and the rupee to a 10-month low.



The rupee is currently on a free fall breaching the head and shoulder pattern at 55.20. Tracking the momentum, we see the rupee heading towards 57 levels soon, added the India Forex report.



Reacting to the weakness in rupee, Sensex plunged 300 points in mid-morning trade below 20000 levels and the 50-share Nifty index slipped below its crucial psychological level of 6050 in trade today.



At 10:30 a.m.; the S&P BSE Sensex was at 19957.36, down 258.04 points or 1.28 per cent. It touched a high of 20,191.29 and a low of 19,917.57 in early trade today.



The Nifty was at 6,042.35, down 81.70 points or 1.33 per cent. It touched a high of 6,106.25 and a low of 6,031.80 in trade today.



\"Rupee has been depreciating and that has been a little bit of a worry for the markets. While dollar has been strengthening against all currencies, rupee has probably weakened a little bit more,\" said Prasun Gajri, CIO, HDFC Life in an interview with ET Now.



According to analysts, weakness in domestic currency may hurt equity markets despite huge gush of liquidity by foreign institutional investors.



\"We should not ignore weakness in the Indian currency and that is one of the primary reasons why we are not positive on markets,\" said Dr Tirthankar Patnaik, Director, Strategist-Institutional Research, Religare Capital Markets in an interview with ET Now.



\"So the rupee and the markets can diverse for short periods of time but they have to go in tandem over the longish period,\" he added.



According to Patnaik, foreign investors with a weak currency have to get a double compensation not just for the equity premium of investing in a country like India but also what they loose on the local currency depreciation.



So unless rupee strongly improves or stay put around or below these levels, markets may come under profit booking at higher levels, say analysts.
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