NEW DELHI: The Indian rupee is likely to end the year 2012 with losses despite record foreign inflows of over $24 billion into stocks, the second highest in the past five years. With a few days left for the New Year, the markets are seen getting huge flows, largely driven by the liquidity exercises by various central banks across the globe and some steps taken by the Central government. "The Indian rupee is down 3 per cent for the year as of December 26, and is set to end the year 2012 with losses, despite attracting record flows of $24 billion" media reported. The rupee is on course to become Asia's third worst performing currency this year. Only the Japanese yen and the Indonesian rupiah have posted bigger losses, according to the currencies tracked by Reuters. The inflows have helped overshadow concerns about the country's twin deficits, on the current and fiscal accounts, sparking a recovery in the rupee from its record low of 57.32 hit in late June. The rupee has had a volatile 2012, slumping to a record low of 57.32/dollar in late June, on concerns about India's current account and fiscal deficits. Although the currency has recovered since mid-September when the government pushed ambitious reforms in retail and aviation, the performance contrasts sharply with the 25 percent gain in the Sensex this year. "The Indian rupee has weakened from the year start on account of the poor macroeconomic fundamentals," said Abhishek Goenka, Founder & CEO, India Forex Advisors Pvt Ltd. "The story of twin account deficit continues to exert pressure on the local currency. The rupee was seen reaching the record low of 57.33 levels against the dollar on the back of poor fundamentals and uncertainties in the global markets," added Goenka. The rupee opened the year with a bias to appreciate as Reserve Bank of India pulled all stops to save the rupee from hitting record lows by minimising speculation earlier in the year. The central bank banned rolling over of forward contracts and put limits on net overnight open positions, among other measures. But it weakened, as oil and gold prices rose, and so did the demand for dollar from the importers. The local currency weakened over 3 per cent this year against the greenback, weighed down by slowdown in exports due to muted global demand. It touched a life's low of 57.33 towards end June, but later recovered to even below 52 by October. However, on Wednesday the government announced incentives to revive growth in exports as it looks to narrow a trade deficit that has put the country's current account balance and currency under pressure. For the coming year, IndiaForex continues to hold their bullish view on USD-INR. The US Dollar Index seems to have bottomed in 2011 near 73 levels and could rise to 90 levels. "High risk aversion and positive economic numbers compared with its peer countries may push the US economy to stronger levels. The Dollar Index going above 85 levels could push the rupee close to 58-59 levels," IndiaForex said in a report.

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