Rupee depreciates on dismal July CPI data; dollar demand hurts too

   

     Indian rupee depreciated on Wednesday as higher-than-expected jump in CPI and slower growth in factory output hurt sentiment for the Indian currency. Limiting central bank's scope for easing policy rates, provisional annual inflatiion rate based on all India general Consumer Price Index (CPI) (Combined) rose more than expected at 7.96% in July as compared to 29-month low of 7.31% in June and 9.64% in the July. 2013, while contradicting indications of strong recovery in domestic economic growth, country's annual industrial output growth, measured by index of industrial production (IIP), slowed down to 3.4% y-o-y in the month of June as compared to 4.7% in May. Further, gains on account of positive local equities were offset by losses on account of sustained dollar demand from oil importers. On the global front, yen held steady versus the dollar on Wednesday, showing limited reaction to the widely expected contraction in Japan's  economy in April-June, while the euro hovered above the previous day's lows.
     Finally the rupee ended at 61.22, weaker by 14 paise from its previous closes of 61.08 on Tuesday. The currency touched a high and low of 61.30 and 61.21 respectively. The Reserve Bank of India's (RBI) reference rate for the dollar stood at 61.24 and for Euro stood at 81.89 on August 13,2014. While, the RBI's reference rate for the yen stood at 59.91, the reference rate for the Great Britain Pound (GBP) stood at 103.0154. The reference. The reference rates are based on 12 noon rates of a few select banks in Mumbai.