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Re snaps 2-day rally, dips 30p to 66 per $ on capital outflows

The rupee broke its two-day of strong rise and fell back by 30 paise to close at 66.00 against the Greenback on fresh dollar demand from importers amid firm USD overseas. Sustained capital outflows also weighed on the rupee while rally in local equities restricted the fall to some extent, a forex dealer said.

At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced weak at 66.15 a dollar from last weekend's close of 65.70 and immediately touched a high of 65.68.

It later turned negative and dropped to a low of 66.30 before recovering some ground to conclude at 66.00, still showing a fall of 30 paise or 0.46 per cent. In last two trading days, it had zoomed by 310 paise or 4.51 per cent.
The dollar index, consisting of six major rivals, was up by 0.10 per cent ahead of a rush of data and central-bank policy decisions due for the week ahead.

The HSBC/Market purchasing managers index (PMI) for the India's manufacturing industry contracted for the first time in over four and a half years to stand at 48.5 in August, lower from 50.1 in July.  Pramit Brahmbhatt, CEO, Alpari Financial Services (India)said,'After appreciating for last two trading days,on Monday Rupee depreciated almost half percent taking cues from strong dollar which is trading positively but range bound for the fourth consecutive day.

On Monday US markets remain closed for the Labor Day holiday, but with key economic data and events due in the week ahead kept the market rolling. The trading range for the spot $/Re pair is expected to be within 65.40 to 66.60.'

'The rupee was seen taking a halt on Monday after witnessing volatile weeks against the US dollar. On account of US bank holiday, the volumes were quite thin and the rupee was seen trading in a very tight range. Last weeks dismal GDP numbers of India and strength in the US dollar index made rupee to open on a weaker note on the day. Going ahead, this week will be action packed as some of the important data will be released from the major countries. Technically, the $/Re pair has a strong support near 65.50 levels,' said Abhishek Goenka, Founder and CEO, India Forex Advisors.

Forward dollar premiums improved further on continued payments from banks and corporates.The benchmark six-month forward dollar premium payable in February firmed up to 258-265 paise from last Friday's close of 247-252 paise. Far-forward contracts maturing in August too hardened to 465-471 paise from 440-445 paise.

The RBI fixed the reference rate for the dollar at 65.8608 and for the euro at 87.0575.The rupee reacted sharply downwards against the pound sterling to end at 102.84 from last close of 101.86 and also turned negative to settle at 87.22 per euro from 87.00. It, however, recovered against the Japanese yen to 66.48 per 100 yen from previous close of 66.91.
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