Mumbai: Rupee eased on Wednesday as weak stock markets raised concerns about fund outflows, while record oil prices made sentiment cautious.
At 10 am, the partially convertible rupee was at 39.38/39 per dollar, weaker from the previous close of 39.355/365 — and further away from 39.16, its highest in nearly 10 years, hit earlier this month.
India’s main share index fell more than 1% in early trade, tracking a slide across the region on concerns of slower growth in the United States.
“It has sparked concern about flow of funds to emerging economies, should the US go into a recession,” a trader with a state-run bank, said.
Capital flows into shares have been a key driver for the rupee in recent months. But foreigners have sold about $135 million worth of Indian shares this month, after buying a net $5.1 billion in October.
“Outflows from the stock market could continue in the near term,” a trader with a foreign bank, said.
Traders anticipated crude refiners to step up dollar purchases in the coming days, after oil came just shy of $100 a barrel on Wednesday.
Oil is India’s biggest import and high crude price raise the risk of widening the trade deficit, which was $64.9 billion in 2006/07.