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Friday, May 11, 2012

Concern over Rupee

The rupee fell on Friday, posting its longest weekly losing streak since the 2008 global financial crisis, after data showing a contraction in factory output for March added to worries about India's economic outlook.
The rupee remains within sight of a record low of 54.30 against the dollar hit in December, having fallen for six consecutive weeks, its longest losing streak since a string of 11 weekly losses in late 2008.
Worries about India's fiscal challenges and its growth outlook are combining with concerns about foreign outflows, resulting in a toxic mix.
The Reserve Bank of India (RBI) has tried to control the falls with frequent interventions though no definitive signs of dollar selling emerged on Friday and measures such as Thursday's order for exporters to convert half of their forex holdings into rupees.
Markets only felt a silent impact after a deputy governor at the central bank said it will continue to target volatility in currencies and appeared to open the door for potential rate cuts.
The rupee ended at 53.63-64 to the dollar, after it had closed at 53.44-45 on Thursday. It fell 0.3% for the week.
Factory data contracted 3.5% in March from a year earlier, government data showed on Friday. The data is volatile, but is an important print for economic activity.
Also weighing on the rupee on Friday was the continued fall in stocks, which notched their fourth consecutive daily loss.
The one-month offshore non-deliverable forward contracts were at 53.94.
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 ended around 53.80 on a total volume of USD 4.32 billion.

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