Rupee declines sharply to end at 43.74

Mumbai, Mar 22 (UNI) The Rupee today declined sharply to close at 43.74 from its previous close of 43.45, after liquidity conditions eased in the money market thereby prompting investors to cover short dollar positions.

Rupee's gains were also limited as traders said state-run banks purchased dollars to protect its exporters. Rupee was not much affected by the impressive gains recorded at the BSE Sensex which rose by over 350 points in the session, traders said.

The forward premia dropped by nearly 27 paise as improved liquidity conditions forced traders and investors to sell forward dollars in the market.

The Dollar rebounded from its early losses suffered in Asian trade as investors believed the Fed will trim the interest rates in the future. Apart from US weekly jobless claims data and US leading indicators data, market participants will also be looking out for comments from Fed chief, Bernanke. Other top Fed officials are also scheduled to speak later in the session.

Elsewhere, the Australian dollar also rallied on the back of expectations of interest rate hike in the near future. The Aussies dollar hit a fresh 10-year high of 0.8087 against the US dollar, analysts disclosed.

Meanwhile, the Yen dipped against the high-yielding currencies as wide interest differentials resulted in resumption of carry trade positions. Governor of Bank of Japan, Fukui, said bank will keep rates very low for some time and adjustments need to be gradual. The Yen was supported for a short period after Japanese land prices rose for the first time in 16 years in 2006.

The Euro hit a 2-year high of 1.3412 in early Asian trade before easing back to the levels of 1.3385. Later, the European currency dropped after Euro zone industrial output data declined to 0.2 per cent month-on-month basis. Investors will also be looking out for speeches from other ECB members. Elsewhere, the Sterling pound strengthened after UK retail sales data rose well above the market expectations. The data advanced to 1.4 per cent m-o-m and 4.95 year-on-year basis. The strong data boosted talks of a rate hike in April. Euro/Dollar was down at 1.3355, while Euro/Yen was steady at 157.30, traders added.

UNI