Rupee will settle down, assures Chidambaram

Finance Minister P Chidambaram took to reassuring investors and traders after the rupee declined to a two-month low of 63 to a dollar, saying the currency will stabilise.

In early trade on Monday, the rupee fell to 63.33 a dollar, its weakest since September 18.

"Rupee will settle down," the finance minister told reporters in the national capital.

The Indian currency started weakening again last week after the dollar purchase by oil companies was partly shifted to the market.

The PSU oil companies are the biggest buyers of dollars, requiring $8-8.5 billion every month for the import of an average 7.5 million tonne of crude oil.

"Rupee weakness is due to OMC forex demand being moved to market... 30-40 per cent of OMC demand has moved to market," Economic Affairs Secretary Arvind Mayaram had said last week.

The rupee has recovered over 8 per cent since August 28, when it fell to a record low of 68.85 to the dollar.

The Reserve Bank of India had in August opened a special window to help the three state-owned oil marketing companies - Indian Oil, Hindustan Petroleum and Bharat Petroleum - to meet daily foreign exchange requirements and buy dollars directly from the central bank.

The gain in the rupee's value had also followed optimism that the US Federal Reserve would delay the tapering of its bond buying programme.

Global central banks unlikely to fight dollar: Poll

London: Global central banks are unlikely to take steps to make their currencies more competitive against the US dollar whose current weakness should prove to be temporary, a Reuters poll found.

The monthly survey of more than 60 foreign exchange analysts and economists showed the euro - which soared above USD 1.38 before shock low inflation data last week - will ease gradually over the next 12 months from here.

That view reflects expectations the US Federal Reserve will start cutting its monthly bond purchase stimulus early next year, probably by March.

After the Fed surprised markets by refraining from doing that this September, major global currencies have strengthened against the dollar. That has caused problems for export-reliant countries, both in Europe and emerging markets.

Still, 28 out of 35 analysts who answered an extra question said the dollar`s weakness would not push world central banks to ease policy to help regain a competitive edge against the greenback.

"(That`s) unlikely, because Fed tapering is inevitable and thus most emerging market currencies will be vulnerable over the medium term," said Barclays analyst Mike Keenan.

But the dollar probably won`t rally soon. The poll showed the dollar index relative to a basket of major currencies closing the year at 81, compared with 80.5 on Wednesday.

Into next year, that should change.

For one thing, the euro`s strength will gradually dissipate next year. That will be at least some relief for the European Central Bank, which meets on Thursday to set policy and is under pressure to act against very weak inflation and boost fragile growth.

The poll`s median outlook showed the euro - which was trading around USD 1.35 on Wednesday - holding around that level in a month`s time, before slipping to USD 1.33 in three months, USD 1.30 in six and USD 1.27 in a year from now.

"We expect a near-term euro appreciation against the dollar given the likely continued U.S. fiscal uncertainties, followed by retrenchment in 2014 as the focus returns to growth and interest rate differentials," said Ric Deverell, head of global foreign exchange at Credit Suisse.

Against sterling, the euro looks set to keep its value for the most part, holding at 84 pence on Wednesday and forecast at 83 pence in a year`s time.