Rupee hits a 10-month low of 56.37 against dollar

The rupee hit a 10-month low of 56.37 against the dollar today, hit hard by persistent dollar demand from importers and banks and weak regional stock and currency markets,  trading at 56.31/32 in late afternoon trades against its previous day's close of 55.96 a dollar.

This is the rupee's lowest level against the US currency since 25 July 2012 and analysts expect the Indian currency to depreciate further to lows around 58 to a dollar despite strong investment inflows.

While some dealers cite excessive buying of non-deliverable forward dollar in the domestic market as the key reason for the rupee's weakness, others point to strengthening of the US dollar against Asian currencies.

The three-month non-deliverable forward dollar in the domestic market was trading at Rs57.24 against the offshore dollar forward contract valued at Rs57.26 per dollar.

The rupee is down nearly 70 paise against the dollar in just two trading sessions - shedding 39 paise on Tuesday and another 32 paise by late afternoon today.

The dollar, however, fell against the Japanese yen in early trading in the international market following a rise in the Japanese bond market.

The country is reported to have received over $125 million in overseas investments in the domestic market, but that has failed to end the rupee's plight, forex dealers said.

The Reserve Bank of India kept its reference rate for the US dollar at Rs56.24 and the reference rate for Euro at Rs72.3240 today, against the corresponding rates for the previous day (28 May 2013) of Rs55.74 and Rs72.03, respectively.

Based on the reference rate for the US dollar, the RBI fixed the middle rates of the cross-currency quotes, the exchange rates of GBP and JPY at Rs84.5389 a pound and Rs55.05 per 100 yen against Rs84.1709 a pound and Rs54.65 per 100 yen on Tuesday.