Rupee extends weakness, closes @58.39/$; RBI steps in

Mumbai (Agencies): In a roller coaster ride, the rupee on Tuesday hit life-time low of 58.98 against dollar but erased a major part of losses to close at 58.39 after RBI intervened in the forex market to stem the slide in the local currency that caused much concern to government, markets and common man. The rupee still closed 24 paise lower at 58.39 compared to Monday's close, extending losses for fifth straight day. At the Interbank Foreign Exchange (Forex) market, the domestic currency commenced lower at 58.30 a dollar from overnight close of 58.15. It dropped further to historic low of 58.98 on bearish stock markets amid reports of selling of government bonds by overseas investors to book profits. However, intervention by RBI near record lows and weak dollar overseas helped the rupee to bounce back to a high of 58.24, before settling at 58.39. The rupee fall escalates worries about the CAD and complicating the task for policy makers who are keen to revive the depressed economy that grew at its slowest in a decade in 2012/13. According to analysts, the RBI could turn more cautious about cutting interest rates at its policy review on June 17, which further down the economic outlook of the country. Interestingly, the central bank remained behind the screen in the early trade, while government pushing various measures including easing investment rules for sovereign wealth funds. While rupee battered, dollar strengthened on expectations that the US Fed would start would commence its quantitative easing programme as the economy recovers. The chief economic adviser to finance ministry, Raghuram Rajan said India would continue to take measures to curb the current account deficit, calling the rupee fall a temporary phenomenon � in line with recent comments from Indian government leaders blaming global factors. The rupee has weakened from 53.8 levels in April-end to over 58-levels at present and is also among the worst performing emerging market currencies in the 2013 so far. "This is a temporary phase. This is simply a correction. Our indication is some of the FIIs are now poised to bring in large funds. In next 3-4 days, we will see a mid-course correction," Department of Economic Affairs Secretary Arvind Mayaram said in New Delhi. He said in the coming days the foreign institutional investors (FIIs) would put in funds into the debt segment which would help the rupee inch up from the current levels. "Certainly we are not happy about it, but we are certainly not unduly worried about it. There will be a course correction.... Rupee is going to stabilise and we are going to see a positive movement," Mayaram said.

Rupee slide hits Cos with Forex loan Mumbai: All those companies with large forex loan exposure without proper hedging may have to provide provisions in the first quarter as the fall in the rupee value against dollar takes away profitability. According analysts, most of the companies engaging in the manufacturing are expected to hit and they may have to write off the losses. Those companies engaged in power generation, cement production and telecom sectors are major losers, they say. Managing the forex exposure would be the biggest challenge for the companies in the first quarter this year. Interestingly the Indian companies believe that the weakness in the rupee is here to stay, as the inflation is about 7-8% on the contrary US inflation is jest around 1%. Hence the rupee will slowly move south-way adding to negative implications, analysts say. However, some opine that the companies are expected to compete in the global markets with major thrust resulting spurt in export growth. This may help rupee to strengthen to a limited extent, but the overall trend would be a weakening rupee exists for some more time.

FinMin taking steps to increase inflows New Delhi (PTI): Finance Ministry on Tuesday said it is working on steps to increase foreign investment inflows and is open to the idea of floating NRI bonds. Seeking to assuage market sentiments, Department of Economic Affairs Secretary Arvind Mayaram said the government was "not unduly disturbed" by steep fall in rupee. Without ruling out the possibility of NRI bonds to raise foreign funds, Chief Economic Advisor Raghuram Rajan also said that government is "looking at all options" and will take steps to increase portfolio and FDI. "We will continue to implement measures to ensure that portfolio investor inflows are enabled and encouraged, and some of these measures will be announced very shortly. In the coming weeks, we will recommend to the Cabinet policies to enhance FDI limits on a number of areas," Rajan said.