Rupee remains weak against dollar, stays below 55 level

The rupee fell against the dollar on Thursday, falling to as low as 55.07 to the dollar, tracking a weak euro ahead of the European Central Bank policy meeting and weaker Asian shares.

Weak investor response at an auction for debt limits for foreign institutional investors (FII) on Wednesday also weighed on sentiment, dealers said.

At 10.47 a.m, the rupee was at 54.92 to the dollar versus its 54.48/49 close on Wednesday.

The rupee continued its slide for the second straight day on Thursday when it opened below 55 to US dollar.

On Wednesday, the rupee fell due to rising dollar demand from oil firms and tracking an overall global slump in risk assets including the euro. The gain on the rupee was attributed to speculation that the government may remove the withholding tax on bonds for foreign investors. However, there was no clarity on the subject will Thursday morning.

The partially convertible rupee closed at 54.48/49 per dollar as per the SBI closing rate on Wednesday, down 0.2 percent from its close of 54.36/37 on Tuesday. The rupee moved in a wide band of 54.18 to 54.86 during the session.

Some traders said there was major dollar demand from a large state-run bank as well, though no details for the demand were available.

The one-month offshore non-deliverable forward contracts were quoted at 54.72 while the three-month were at 55.45.

Copyright @Thomson Reuters 2012