MUMBAI: The Indian rupee weakened to its lowest level this week on Wednesday, tracking losses in the euro after a media report quoted German Chancellor Angela Merkel as expressing doubts on the success of the European project.
The euro fell to a session low after the report. Traders said dollar demand from oil firms and defence companies also weighed on the rupee.
"Merkel's comments added to the euro's fall. There was dollar demand from defence firms and to some extent from oil as well," said Pramod Patil, a forex dealer at United Overseas Bank. He predicted the rupee's range between 55.20 and 55.75 for the week.
"Markets are disappointed as Bernanke didn't hint at any clear stimulus or easing as was being talked about."
Federal Reserve Chairman Ben Bernanke on Tuesday offered a gloomy view of the US economy's prospects, but provided few concrete clues on whether the Fed was moving closer to a fresh round of monetary stimulus.
The partially convertible rupee closed at 55.48/49 per dollar as per the SBI closing rate, weaker than its close of 55.1250/1450 on Tuesday. It dropped to as low as 55.55 during the session, its lowest since July 13.
India's consumer price index (CPI) for industrial workers rose 10.16 percent in May from a year earlier, slower than an annual rise of 10.22 percent in April, government data showed on Friday.
Traders and analysts said the high CPI was another factor that pushed the rupee lower.
Traders will now focus on the Indian presidential polls on Thursday, following which the government is expected to revive stalled reforms like foreign direct investment in retail and aviation, increase in diesel prices among other things.
The one month offshore non-deliverable forward contracts were quoted at 55.73 while the three-month was at 56.34. The most-traded near-month dollar/rupee contracts on the currency futures market on the National Stock Exchange, MCX-SX and the United Stock Exchange, all closed at around 55.49 w i th a total volume of around $4.4 billion.
