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Rupee ends weak at 47.01/$ on imports; politics weighs

The rupee ended Tuesday weaker as corporate import demand and political uncertainty led to dollar buying, dealers said.

An American bank and another large state-run bank were dollar buyers and dealers said the importers who covered exposures included a state-run firm.

The rupee ended weaker at 47.0050/0150 per dollar, very close to its all-time closing low of 47.00/02 on April 16, and compared with Monday's 46.9675/9775.

It traded in a narrow range of 46.99-47.01 through the day.

"The rupee's close below 47 will have an adverse impact on sentiment," the chief dealer at a foreign bank said.

Though there might be early dollar sales on Wednesday to benefit from a near two paise weekend swap benefit, dealers said banks may hesitate to initiate short dollar positions, expecting import demand.

The dollar's rally overseas, rising global gold prices and the continuing firm trend in crude oil which is around $30 a barrel also affected outlook, dealers said.

India is the world's biggest consumer of gold. Crude oil accounts for about one-third of India's merchandise imports.

At Tuesday's levels, the rupee is still over two percent overvalued against the real effective exchange rate, a trade-weighted index, dealers said.

India's coalition government, led by Prime Minister Atal Bihari Vajpayee's Bharatiya Janata Party, is facing fresh trouble after the administration in the northeastern state of Manipur led by a key ally was toppled by a confidence vote.

If the Samata Party walks out of Vajpayee's coalition in retaliation, it will reduce the government's majority in the lower house of Parliament to just seven seats.

Samata Party leader George Fernandes said on Tuesday it will take time to decide on whether to pull his party out of the ruling coalition.

Forwards were steady across most maturities and dipped a bit at the longer end.

Dealers said the receiving may have been led by waning expectations of further rate cuts in the United States and the hopes of a cut in the domestic benchmark bank rate.

The six-month forward premium ended Tuesday steady at 5.09 per cent.

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