The Indian Rupee Lost 17 Paise - June 5, 2008

The Indian rupee lost 17 paise at 42।77/78 against the greenback on Wednesday after failing to hold the initial surge as meltdown in stock markets raised fears of capital outflows। At the Interbank Foreign Exchange (forex) market, the domestic unit resumed stronger at 42.58/59 and later moved in a range of 42.53 and 42.80 during the day. It had closed at 42.60/61 a dollar

Forex dealers attributed initial surge in the local currency to fairly heavy dollar selling by custodial banks in the face of slow demand from oil companies.

They said a sharp fall in domestic stocks after the government raised the petrol and diesel prices by Rs 5 and 3 a litre respectively weighed heavily on the rupee sentiment.

Analysts said fuel price hike is expected to push up inflation further and in turn will have adverse impact on the rupee as high inflation is likely to put pressure on equity markets affecting the capital inflows, key driver of the local currency. Heavy portfolio inflows last year had helped the rupee to surge by more than 12 per cent.