The Indian rupee fell to its lowest in two weeks on Wednesday, tracking gains in the global dollar and after rating agency Standard & Poor's said downgrade risks remained even after the current spate of reforms. The fall in the rupee, exacerbated by the S&P warning, again highlighted the local currency's vulnerability to its twin deficits - the external account as well as the fiscal deficit.
"I do not expect any sharp gains in the rupee as foreign fund inflows into stocks seem to have slowed in the past few sessions. Reform measures have not resulted in any real flows," said Param Sharma, director and chief executive at NSP Treasury Risk Management.
He expects the rupee to further weaken to 53.50 to the dollar and trade in a 52-54 band for the next 2-3 months. The partially convertible rupee closed at 53.0450/0550 per dollar versus its previous close of 52.72/73, a fourth successive session of fall and its longest losing streak since late July. It earlier hit a session low of 53.1850, its lowest since September 27. The one-month non-deliverable offshore contract was trading at 53.23 while the three-month was at 53.72. In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 53.17 with a total traded volume of about $6.7 billion.
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