Rupee ends down on muted dollar inflows, high oil prices
The announcement follows a dramatic day that saw confusion prevail over numbers.
The rupee started the final month of the fiscal year on a weak note on Thursday as a lack of interest by foreign investors in the government's sale of shares in Oil and Natural Gas Corp dampened expectations of a pickup in capital inflows.
Strong dollar demand for oil and defence-related payments also pressured the currency, traders said.
"We were anticipating much stronger response to the ONGC issue from overseas investors," said a foreign bank dealer.
"But since this didn't happen, the market realised that there is no positive trigger left, which was the key reason for the rupee to weaken," the dealer said.
Bids for ONGC shares amounted to only about two-thirds of the total on offer, TV channels said. The government had hoped to raise about $2.5 billion from the sale.
The rupee snapped a 2-day rise to close at 49.21/22 to the dollar, down from Wednesday's close of 49.0050/0150, after moving in a band of 49.045-49.245.
Dollars were bought around the 49.14/15 level for oil and defence-related payments, dealers said.
The rupee is expected to trade between 48.60 and 49.70 to the dollar until the federal budget on March 16, they said.
"High inflation, fiscal concerns, net outflows from equity and bond markets, (a) large current account deficit, and expectation of multiple policy rate cuts in 2012 are likely to keep the rupee on a weak note in the current year," said Sailesh K. Jha, head of Asia strategy at Skandinaviska Enskilda Banken in Singapore.
A surge in oil prices is also fanning fears of increased demand for dollars by India, which imports about 80 percent of its oil requirements.
The euro dipped to a one-week low against the dollar on profit-taking after a huge injection of cash by the European Central Bank, with further losses likely due to concerns about debt and a fragile euro zone economy.
The euro is often considered a gauge of risk appetite.
One-month offshore non-deliverable forward contracts were at 49.20. In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 49.54, on a total volume of $3.1 billion.
Copyright@ Thomson Reuters 2012