MUMBAI (Reuters) ? The rupee posted its biggest weekly fall in more than 15 years on Friday on heightened risk aversion amid the possibility of a recession in the developed world, even as it rebounded from a 28-month low on suspected intervention by the central bank.
Traders said the rupee will not be able to stay strong as growing concern about the impact of a possible Greek default on the banking sector will negate any move by India's central bank to support the unit.
"Rupee's loss is more than what is warranted when compared with gains in the dollar index. But we could see rupee hit 50.50 if the index touches the level of 80," said J. Moses Harding, head of global markets at IndusInd Bank.
The dollar index, the gauge of its performance against a basket of currencies, extended gains from a 7-month high on Thursday and was at 78.502 points at end of rupee trade on Friday. It had been 78.506 end of rupee trade on Thursday.
The partially convertible rupee ended at 49.42/43, stronger than Thursday's close of 49.57/58, when its suffered its biggest single day loss in nearly 3 years. It lost 4.4 percent in the past week, its biggest fall since the week ended July 12, 1996, to log its third consecutive week of decline.
The unit, has already lost more than 11 percent so far this year from its high in late July and remains the biggest under performer among Asian peers.
"Right now, the market is hungry for dollars and till the time there is significant dilution in the demand, intervention from the central bank will only cushion the rupee's fall, not reverse the trend," Harding said.
The partially convertible rupee rebounded to 49.10 per dollar in quick trades after hitting 49.90 -- its weakest since May 14, 2009 -- in early trades.
Most traders attributed the rupee's sharp recovery to dollar sales by the Reserve Bank of India, with small gains in the euro contributing.
This is the second consecutive day when the central bank is believed to have intervened to stem the rupee's fall.
"Had the RBI not been there, rupee could have crossed the 50 mark in opening trades itself. But as you can see there is natural demand for dollars and once the RBI stepped back, the rupee decayed," said a foreign exchange dealer at large domestic engineering conglomerate.
Subir Gokarn, one of the RBI deputy governors, told CNBC TV-18 that the central bank would maintain its stance of intervening in the foreign exchange market only to ease volatility.
The one-month onshore forward premium was at 20.50 points from 21 on Thursday, the three-month was at 64.75 points from 63 and the one-year was at 131.25 points from 126.50.
The one-month offshore non-deliverable forward contracts were quoted at 49.76, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were at 49.4700, 49.4675 and 49.550 respectively. The total volume was $12.29 billion.
(Editing by Aradhana Aravindan)
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