S&P, speculators drag down rupee to 62.37 a dollar

The Indian rupee hit an intraday low of 62.73 against the US dollar, a level not seen in the last five weeks, after rating agency Standard & Poor's said in a report that India faces a possible rating downgrade next year if the new government failed to push economic reforms and growth.

The rupee, however, recovered from the day's lows after the Reserve Bank sold dollars through state-run banks, dealers said.

The partially convertible rupee recovered to 62.47/48 a dollar before ending at 62.41/42 per dollar against yesterday's close of 62.39/40 a dollar.

Also, dealers said, state-run oil refiners have resumed buying some of their dollar requirements from the foreign exchange market.

Reports also quoted a top finance ministry official as saying that 30-40 per cent of the state-run companies' dollar demand for oil imports has returned to market.

RBI had earlier opened a special window at select public sector banks to service oil companies' dollar demand.

Consistent dollar buying by these state-run banks in recent sessions had led to speculation that refiners were meeting some of their dollar demand directly from the market.

Also, expectation that RBI may roll back the special forex swap window for oil marketing companies has put pressure on the domestic currency. The rollback may reduce the flow of the dollar into the market.

S&P said it may cut India's sovereign rating to below investment grade should the next government fail to provide a credible plan to reverse the country's low economic growth.

The rupee had lost 76 paise on Wednesday, on the back of sustained dollar demand and a weak domestic equity market. Capital outflows and dollar demand are adding to the rupee woes.