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Rupee expected to weaken further on month-end dollar demand

BS Reporter/Mumbai 24 Dec 12 | 12:40 AM

The rupee is expected to weaken further from current levels this week due to month-end dollar demand. There are also possibilities that it might touch 55.50-55.60 against the dollar next week.

“There is a lot of dollar buying expected till December 31. After that, it might come down, due to which the rupee might touch 55.60 against the dollar this week," said J Moses Harding, head - of economic and market research, IndusInd Bank.

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The rupee touched a three-week low on Friday against the dollar due to uncertainty over the US fiscal cliff resolution. This resulted in lack of demand for riskier assets like equities. The fall in domestic equities resulted in the rupee closing at Rs 55.07 compared with the previous close of Rs 54.85. On Friday, the rupee traded in a range of Rs 54.98 to Rs 55.23. The level of Rs 55.23 was its weakest since November 29.

During the week, there was demand for dollar, from oil companies, coupled with gold importers purchasing the greenback to take advantage of slightly lower global gold prices. “There is also dollar demand for defence-related purchases and it will continue for the next few days," said a currency dealer with a public sector bank.

Gilts, on the other hand, are expected to trade in a range. Yields on the 10-year benchmark gilt 8.15-2022 are expected to trade in the range of 8.13-8.18 per cent. On Friday, it ended at 8.14 per cent, compared with the previous close of 8.15 per cent. According to Harding, there is no fresh appetite for gilts. Traders are unwinding their positions and booking profits, he added.

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