Mumbai: The Indian rupee fell to its lowest in more than three weeks on Wednesday as a stock market slide triggered concerns of fund outflows, and weighed down by the dollar’s rise overseas.
The partially convertible rupee ended at Rs46.3650/3750 per dollar, about 0.5% below its previous close of Rs46.1250/1350. It dropped as low as Rs46.425 during trade, its weakest since 4 January. Falling stocks, which dropped for a sixth day, brought out the rupee bears, a senior trader with a foreign bank who expected a range of 46.30 to 46.50 on Thursday.
Fund flows in the stock market is a key driver for the rupee. Foreigners have dumped about $900 million of stocks in eight out of the last nine trading sessions. The BSE share index dropped 2.9% to its lowest close in nearly 12 weeks.
In 2009, the rupee had gained 4.7% as foreign funds bought shares worth $17.5 billion and helped the benchmark index jump 81%.
“There is also concern on the RBI’s rate decision this week on growth,” the senior trader said, referring to Reserve Bank of India’s policy review on Friday.
A Reuters poll showed that most economists expect the Reserve Bank of India (RBI) to raise banks’ reserve requirement by up to 50 basis points at its review meeting.
A minority in the poll expected it to raise benchmark interest rates.
The dollar’s strength versus the euro also weighed. The US currency rose as investors liquidated riskier assets on concerns about China tightening banks’ lending and ahead of the Federal Reserve’s rate decision later on Wednesday.
One-month offshore non-deliverable forward contracts were at Rs46.46/50, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month contracts on the National Stock Exchange and MCX-SX were at 46.28 and 46.2825 respectively.