Re dives to 56.01 on fears of Greek exit from euro

Mumbai: The rupee weakened beyond 56 per US dollar and closed at 56.01 as the euro fell to a 20-month low against the dollar on fears of a Greek exit from the common currency. Forex dealers said that the petrol price hike was a positive for the exchange rate and equity markets, but Thursday's opening would depend on how the global sentiment in respect of euro moves tonight. 

    The rupee was among the worst losers in Asia as traders felt that weak macroeconomic indicators made the rupee more vulnerable in a risk-off scenario. A 'risk-off ' scenario is a term used to describe an environment in which investors shun markets despite higher returns in favour of safe haven investments even if returns are negligible. 

    "Ideally, the petrol price hike should support the rupee as it shows a move away from the policy paralysis. This and more such bold moves would really help India to come out of a negative perception. However, given that there is a lot of risk aversion overseas, tomorrow's (Thursday's) movement will depend a lot on what happens in the international markets overnight," said Ashish Vaidya, head of fixed income currency and commodities at UBS. 

    The local currency, which opened at around 55.68, soon fell to the day's low of 56.22. However, the currency recovered to close at 56.01. 

    Quotes in the forward market indicate that the rupee could slip close to 58 in six months or beyond 59 in 12 months. 

    "While fundamental stresses persist at the core of rupee weakness, added uncertainties regarding Greece's future and Chinese growth have only exacerbated the situation," said Priyanka Kishore, forex strategist at Standard Chartered Bank. According to Kishore, technical charts show that the rupee could stop somewhere between 57.32-58.62, most likely around 58.54/58.62. 

UNENDING SLIDE 

tRe slipped to 56.22 intra-day as euro fell to 20-mth low against dollar on Greek exit fears 

tDomestic currency fared worst among Asian losers as traders felt weak macroeconomic indicators made the rupee more vulnerable 

tForward market quotes indicate rupee could slide to 58 in six months, or beyond 59 in a year