The Hindu RUPEE POWER: The study, authored by RBI Director Rajiv Ranjan and Assistant Advisor Anand Prakash, has mooted the idea of floating the rupee as a global currency.
The Indian rupee posted its biggest single-day fall in 15 months on Wednesday as emerging market stocks tumbled following Germany's decision to tighten financial regulation while the euro's decline hurt sentiment. The partially convertible rupee closed at 46.36/37 per dollar after hitting 46.41, its weakest since Feb. 25 and 1.64 percent below Tuesday's close of 45.60/61.
This is the rupee's biggest single-day fall since Feb. 17, 2009, when the rupee had dropped 1.65 percent. "The weak global cues will pull the Sensex down to 16,350-16,500 which is expected to form a strong short term base.
EUR/USD holding above 1.1700 and Sensex above 16,350 is essential and critical to arrest rupee weakness beyond 46.75," said J. Moses Harding, head of global markets at IndusInd Bank. "If not, it would be tough time for RBI (Reserve Bank of India) to arrest the rupee's weakness," he said. The euro hit a four-year low against the dollar on Wednesday after Germany banned naked short selling of some securities, sparking uncertainty and a fresh wave of risk aversion which lifted the dollar and yen.
Dealers said sporadic dollar selling by exporters helped limit a sharper fall in the local unit. The central bank can intervene through state-run banks to prevent a steep fall in the rupee, but that was unlikely most traders said as long as the unit moved in line with fundamentals. "The central bank did not come in today despite the sharp fall and there was no reason that they should have. The rupee's move was in line with global dollar moves and world equities," a senior dealer with a private bank said.
"Broadly I think that the USD/INR is near a top but would not exclude a blow out of 46.50 and then it will depend on what happens with the euro and stocks," he added. Indian shares <.BSESN> fell the most in more than three-and-a-half months to close 2.8 percent lower, its lowest close since late February, as global stocks tumbled after Germany's move to sharpen financial regulation raised doubts about the global recovery, triggering a flight to safety.
Foreign funds have already pulled out around $886 million from Indian equities so far in 2010, and there are concerns the pressure may continue until the euro zone situation improves. These outflows have played a role in pushing the rupee down 4.3 percent in May, bringing down its gains in 2010 to just 0.4 percent. Last year record inflows of $17.5 billion had helped the rupee rise 4.7 percent.
One-month offshore non-deliverable forward contracts were quoted at 46.52, weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 46.38 and 46.3925 respectively, with the total traded volume on the two exchanges at about $8.7 billion.
The Indian rupee posted its biggest single-day fall in 15 months on Wednesday as emerging market stocks tumbled following Germany's decision to tighten financial regulation while the euro's decline hurt sentiment. The partially convertible rupee closed at 46.36/37 per dollar after hitting 46.41, its weakest since Feb. 25 and 1.64 percent below Tuesday's close of 45.60/61.
This is the rupee's biggest single-day fall since Feb. 17, 2009, when the rupee had dropped 1.65 percent. "The weak global cues will pull the Sensex down to 16,350-16,500 which is expected to form a strong short term base.
EUR/USD holding above 1.1700 and Sensex above 16,350 is essential and critical to arrest rupee weakness beyond 46.75," said J. Moses Harding, head of global markets at IndusInd Bank. "If not, it would be tough time for RBI (Reserve Bank of India) to arrest the rupee's weakness," he said. The euro hit a four-year low against the dollar on Wednesday after Germany banned naked short selling of some securities, sparking uncertainty and a fresh wave of risk aversion which lifted the dollar and yen.
Dealers said sporadic dollar selling by exporters helped limit a sharper fall in the local unit. The central bank can intervene through state-run banks to prevent a steep fall in the rupee, but that was unlikely most traders said as long as the unit moved in line with fundamentals. "The central bank did not come in today despite the sharp fall and there was no reason that they should have. The rupee's move was in line with global dollar moves and world equities," a senior dealer with a private bank said.
"Broadly I think that the USD/INR is near a top but would not exclude a blow out of 46.50 and then it will depend on what happens with the euro and stocks," he added. Indian shares <.BSESN> fell the most in more than three-and-a-half months to close 2.8 percent lower, its lowest close since late February, as global stocks tumbled after Germany's move to sharpen financial regulation raised doubts about the global recovery, triggering a flight to safety.
Foreign funds have already pulled out around $886 million from Indian equities so far in 2010, and there are concerns the pressure may continue until the euro zone situation improves. These outflows have played a role in pushing the rupee down 4.3 percent in May, bringing down its gains in 2010 to just 0.4 percent. Last year record inflows of $17.5 billion had helped the rupee rise 4.7 percent.
One-month offshore non-deliverable forward contracts were quoted at 46.52, weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 46.38 and 46.3925 respectively, with the total traded volume on the two exchanges at about $8.7 billion.
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