Forex: The rupee has once again turned shaky

The rupee once again turned shaky after a brief recovery and ended substantially lower at 67.25 against the US counterpart - a fall of 22 paise in a highly volatile week on the back of renewed dollar demand from importers and banks. Highly bullish overseas sentiment in the face of impending Fed rate hike predominantly pressurised the domestic currency to depreciate.

Forex traders avoided taking long positions ahead of the Reserve Bank of India's (RBI's) bi-monthly monetary policy meet next week amid speculation that RBI Governor Raghuram Rajan might not be interested in a second-term. But, the fall was limited to due to buoyant rupee sentiment following strong dollar flows into equities and debt alongwith encouraging macroeconomic indicators.

Suspected RBI intervention through state-owned banks also helped the home currency to recouped some early losses. The domestic unit resumed sharply lower at 67.21 a dollar against last weekend closing value of 67.03 at the Interbank Foreign Exchange (Forex) market. But, it recovered immediately to trade briefly at a fresh high of 67.1075 due to smooth dollar supply.

However, the breakout proved short-lived, as rupee suffered a mid-week blow and retreated sharply to hit a low of 67.4625 before ending a 67.25, showing a loss of 22 paise, or 0.31 per cent.

The home unit, had gained 41 paise against the dollar last week. Meanwhile, the RBI fixed the reference rate for the USD at 67.2415 and the euro at 74.9944 as against the last weekend's level of 67.0613 and 75.0885, respectively. In cross-currency trade, rupee recovered sharply against the pound sterling and finished at 96.98 from 98.19 last Friday.

However, it fell back against the euro to end at 74.94 compared to 74.85 and retreated against the Japanese Yen to settle at 61.78 per 100 yens as compared to 61.12 earlier week. In the forward market, premium for dollars remained under pressure due to consistent receipts from exporters.

The benchmark six-month forward dollar premium payable in October declined to 163.5-164.25 paise from preceding weekend's level of 173-175 paise and far-forward contracts maturing in April also dropped to 359.5-360.5 paise from 370-372 paise. The new six-month forward dollar payable in November and the far-forward contracts maturing in May was quoted at 200-200.75 paise and 392-393 paise, respectively.

Foreign portfolio investors (FPIs) pumped in net USD 201.43 million in first four days of the week as per the SEBI's record. In worldwide trade, dollar suffered a setback and posted its biggest one-day percentage slump against a basket of major currencies in four-months, after a shockingly low payrolls gain in May cast doubt on whether the Federal Reserve would raise US interest rates soon as expected.

The Dollar index, a measure of the dollar's strength against a basket of six rivals, tumbled 1.66 per cent at 93.90.