Mumbai: The rupee weakened on Monday as demand for dollars from some corporates and banks looking to arbitrage in the offshore markets weighed, with a fall in the local share market adding to the pressure.
The partially convertible rupee closed at Rs48.84/85 per dollar, 1.2% weaker than its Friday’s close of Rs48.27/29.
Shares fell 3.15% to their lowest close in more than five weeks on Monday as investors braced for tough quarterly earnings, but scandal-scarred Satyam jumped 44% on hopes a government-appointed board will rescue the company.
Foreign funds have so far in 2009 sold a net $70 million of shares, after selling more than $13 billion in 2008.
One-month offshore non-deliverable forward contracts were at Rs49.12/22, weaker than the onshore spot rate. When the gap between the local and offshore market is wide, investors buy dollars in the spot market and sell in the offshore market to arbitrage the differential.
Dealers said a rise in the industrial output in November gave the rupee a boost, but dollar demand was too great for the gain to be sustained.
Industrial output growth rebounded in November from its first annual fall in more 13 years, but analysts said the strength may not be sustained and it would not alter the RBI’s bias for easier policy.