Rupee hit by oil dollar demand, ends at 51.58; more falls seen (ET)

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The rupee fell on Thursday, erasing earlier gains, weighed by dollar demand from local oil refiners and on continued concerns over foreign portfolio flows. However, expectations for a rate cut from the Reserve Bank of India next week after much weaker-than-expected industrial output data bolstered stock markets, providing some support for the rupee, traders said. Still, traders expect the rupee to remain under pressure, as a widening current account deficit and doubts about foreign capital flows keep investors on edge. A Reuters poll out on Thursday showed investors were the most pessimistic on the rupee among Asia's emerging market currencies for a third consecutive month. "Market is nervous about continuation of FII flows especially after the budget, since flows are needed to bridge the huge current account gap. And this fear is keeping rupee under pressure," said Anil Kumar Bhansali, vice-president at Mecklai Financials. The rupee ended at 51.5800/5850 to the dollar compared with Wednesday's close of 51.42/43. It had risen as high as 51.2950 in early trades most likely on dollar sales by some foreign banks, dealers said. The rupee remains in a downtrend, with next support seen at the 51.64 low on Wednesday and support after that seen at 52.13, the 61.8 percent retracement from the Dec. 15 low to the Feb. 6 high. Not all analysts are pessimistic on the rupee. Nomura said it retains its long call on the rupee, eyeing a break of 50 over the next three months, though recommending options trades to avoid the expected volatility. Nomura's strategists attributed their more optimistic view to expectations for rate cuts and an improved economic environment in India. The one-month offshore non-deliverable forward contracts were at 51.99. In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange all ended around 51.7, on a total volume of $3.3 billion.