ND: Indian Rupee Plunges To 1-week Low Against Dollar
Friday morning, the Indian rupee slipped to a 1-week low against the US dollar on an increased dollar demand by banks and concerns over fund outflows from the weak domestic equity markets in tandem with falling Asian bourses.
Indian stocks opened lower today, driving the benchmark down the most in a week. Bharat Heavy Electricals Ltd., the nation's biggest maker of electrical equipment, dropped after reporting third-quarter profit that missed analyst estimates.
At 11:00 am IST, Bombay Stock Exchange's Sensex was at 9173.53, down 62.75 points or 0.68 per cent. National Stock Exchange's Nifty was at 2802.10, down 21.85 points or 0.77 per cent. The benchmark stock index slumped 4.7 percent this month as equity sales by foreigners exceeded purchases by $1.1 billion.
The rupee dropped to a 1-week low of 49.1350 against the dollar today. If the Indian currency weakens further, it may test support around the 49.3 level. The dollar-rupee pair closed yesterday's New York session at 48.95.
The Reserve Bank of India retained its key interest rates and cash reserve ratio at its monetary policy meeting on Tuesday. At the same time, the central bank reduced its economic growth forecast for 2008-09, citing slowdown in industry and services.
The repo rate, the rate at which the central bank lends to commercial banks was left unchanged at 5.5% and the reverse repo rate, the rate at which the RBI borrows money from banks was held at 4%. The repo rate thus stands at the lowest level in more than 8 years. The central bank also maintained the bank rate at 6%, the Third Quarter Review of Monetary Policy 2008-09 showed. Most economists were expecting the central bank to maintain its key interest rates unchanged.
Keeping in view the slowdown in industry and services and assuming normal agricultural production, the projection of overall real GDP growth for 2008-09 was revised downward to 7% with a downward bias from 7.5%-8%.
In its Third Quarter Review of Monetary Policy 2008-09, the central bank said the global crisis will dent India's growth trajectory as investments and exports slow. However, India's turnaround would be sharper and swifter backed by strong fundamentals and the untapped growth potential.
