MUMBAI: The Indian rupee fell on Monday as aggressive dollar purchases from local oil refiners offset the impact from rising domestic stocks, with traders also waiting for the industrial output data for clues on growth and interest rates.
Expectations of a rate cut from the Reserve Bank of India at its policy review later this week have risen after the RBI slashed the cash reserve ratio by 75 basis points on Friday, and weak industrial output data would add to those bets.
Indian industrial production (IIP) is likely to have grown by a median 2.1 percent in January from a year earlier, compared with 1.8 percent in the previous month, according to a Reuters poll.
At 10:15 a.m. (0445 GMT), the rupee was at 49.95/96 to the dollar, down from Friday's close of 49.84/85.
"There was some bit of dollar selling in early trades, but oil companies have been continuously buying dollars, keeping the pressure on the rupee," said a senior foreign exchange dealer with a foreign bank.
The dealer predicts more weakness was likely in the local currency with a move towards the 51 level as worries over global growth trajectory persist.
The reduction in the CRR and consequent liquidity injection is also not expected to increase the RBI's capacity to sell dollars in case of a sharp slide in the rupee.
"Liquidity will still remain quite tight as outflows for advance taxes will also happen," a foreign exchange dealer said.
Local companies will pay the last installment of their advance taxes for the current financial year by March 15.
The RBI has been actively intervening in the currency markets over the past few months to help support the rupee, which touched a record low of 54.30 on Dec. 15.
Oil is India's biggest import item, and consequently, local oil refiners are the largest buyers of greenbacks in the domestic currency market.
The one-month offshore non-deliverable forward contracts were at 50.4.
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 were all around 50.16, on a total volume of $908 million.
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