Mumbai: The Indian rupee opened at its lowest in a week on Tuesday, 28 August, as oil companies bought dollars to meet overseas payments, and easing capital inflows prompted dealers to cut positions in the local unit.
At 9:40am (0410 GMT), the partially convertible rupee was at 41.1550/1650, slipping from Monday’s 41.01/02. It hit a nine-year high of 40.20 last month, but has since slipped on waning appetite for riskier emerging market assets.
“The capital flows are definitely slowing down and the market is coming around to the view that the rupee is going to weaken a bit,” said a senior dealer with a private bank, who expects the rupee to trade in a 41.25-41.10 range on Tuesday.
Indian shares rose nearly 3% on Monday to their highest close in almost two weeks, though dealers said overseas investment flows into local equities were tepid.
Foreigners have bought nearly $200 million of stocks in the last two sessions, but they are net sellers of $2.2 billion this month.
Dealers said that trading volumes were likely to remain thin, with the market cautious about the fallout from the global liquidity crunch and its impact on demand for relatively risky assets like the rupee.
Traders also focused on the potentially destablizing impasse between the Indian government and its communist allies over the nuclear deal with the US.
The rupee came under pressure as oil refiners stepped up dollar purchases to meet month-end payments. Oil is India’s largest import.
Still, the rupee is likely to find support from exporters who could sell the US currency around 41.25, dealers said.