Fed Cuts on Stimulus Crashes Rupee to Near 60
The rupee was off session lows in
early trade on Wednesday on 19 June, but still remained close to its record low
ahead of the outcome of the Federal Reserve meeting that may signal a tapering
down of the US stimulus programme.
The rupee was trading at 58.70/72 per dollar at 0336 GMT
after opening at 58.82. The rupee hit a record closing low of 58.77/78 the
previous day, and remains within touch of an all-time low of 58.98 last
week.
According to global research firm Dun & Bradstreet
(D&B) report, the rupee is expected to remain under pressure in the near
term, given the strengthening of the dollar against major global currencies and
widening of the trade deficit.
The rupee has depreciated nearly six per cent over the past
month and had hit a life-time low of 58.98 against the dollar on June 11. It
may be recalled that the fall was good 12 percent
last year in June when it crashed to Rs. 55.
On rate cuts the report said RBI is likely to continue with
its easing of monetary policy to support growth if the rupee stabilises in the
near term.
A
finance ministry panel has recommended increasing foreign investment limits in
areas including defense, telecommunications and
retail, according to mayaram panel recommendations.
Overseas investors should be able to own all of a telecom
company in India instead of the current limit of 74 percent,
according to the panel’s proposals. The ceiling in defense
should be raised to 49 percent from 26 percent and in supermarkets to 74 percent
from 51 percent, they said. The idea is to attract
the dollars released by Fed’s debt purchases.
Fed Chairman Ben S. Bernanke will speak to reporters at the
end of the monetary authority’s two-day meeting today, almost a month after he
said stimulus measures could be scaled back if the labor
market shows sustainable improvement.
Global funds have cut holdings of Indian debt by $4.7 billion
from a record $38.5 billion on May 21, as the premium offered by 10-year
sovereign bonds over U.S. Treasuries dropped by 34 basis points. The Fed has been
buying $85 billion of bonds a month, a measure known as quantitative easing, to
spur the world’s largest economy. The cash has contributed to inflows into
higher-yielding emerging markets.
Three-month onshore rupee forwards fell 0.1 percent from yesterday to 59.76 per dollar, according to
data compiled by Bloomberg. Offshore non-deliverable contracts fell 0.3 percent to 59.95. Forwards are agreements to buy or sell
assets at a set price and date. Non-deliverable contracts are settled in
dollars.
• USDINR
pair opened the session higher and posted healthy gains of more than one and a
half percent.
• The
two-day Fed meeting had started and it will be the main focus for global
markets this week as investors will be listening for details on when the Fed
may start scaling back its USD 85 billion monthly bond purchases.
• US
Fed is also expected to provide an update on its economic projections for
2013-2015.
June Futures - Technical
levels (Support and Resistance)
|
SYMBOL |
Expiry |
Close |
S1 |
S2 |
S3 |
R1 |
R2 |
R3 |
|
USDINR |
June
2013 |
58.87 |
58.28 |
57.69 |
57.37 |
59.19 |
59.50 |
60.09 |
|
EURINR |
June
2013 |
78.71 |
78.07 |
77.42 |
77.07 |
79.07 |
79.42 |
80.07 |
|
JPYINR |
June
2013 |
61.70 |
61.39 |
61.09 |
60.86 |
61.93 |
62.16 |
62.46 |
|
GBPINR |
June
2013 |
91.84 |
91.24 |
90.64 |
90.28 |
92.20 |
92.56 |
93.16 |