Mumbai: The Indian rupee dropped to its lowest level in two weeks on Wednesday, weighed by early losses in local shares and weak regional peers. Traders said the dollar’s moves versus majors would be watched for cues.
At 10:10am, the partially convertible rupee was at Rs46.62/63 per dollar after touching Rs46.7025, its lowest since 15 June and weaker than Tuesday’s close of Rs46.48/49.
“Today’s theme is risk aversion. There is not much dollar demand seen yet, but we have big orders from oil companies,” a senior dealer with a large state-run bank said.
Oil is India’s biggest import and refiners are the largest buyers of dollars in the local currency market with demand tending to peak at the end of each month when they are required to make payments.
“I guess it will be critical for rupee to hold below 46.70 if we are to trade in manageable ranges -- could well become ugly if we break and close above that level,” said R.K. Gurumurthy, head of treasury at ING Vysya Bank.
Indian shares reversed most early losses and were trading down just about 0.2% tracking a pull-back in other regional markets. They had dropped as much as 0.9% earlier and then briefly turned positive.
Foreign fund moves into and out of the sharemarket are monitored as they have a large influence on the rupee. Foreigners have bought a net $6.7 billion in 2010, in addition to last year’s record $17.5 billion inflow.
Most Asian currencies dropped against the dollar.
The index of the dollar against six major currencies was down 0.06% and would be watched, dealers said.
The yen kept the euro and the Australian dollar pinned down near lows on Wednesday, after a heavy round of leveraged trade unwinding, and the euro also struggled above a record low on the safe-haven Swiss franc.
One-month offshore non-deliverable forward contracts were quoted at 46.78, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were at 46.76 and 46.77 respectively, with the total traded volume on the two exchanges at about $705 million.