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Rupee slips to two-week low as risk appetite wanes

Rupee slips to two-week low as risk appetite wanes
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First Published: Tue, Dec 18 2007. 11 01 AM IST
Updated: Tue, Dec 18 2007. 11 01 AM IST
Mumbai: Rupee fell to a two-week low on Tuesday, moving in step with most other Asian currencies as overseas investors exited positions in emerging market assets on concerns about the health of the US economy.
At 9:40 am, the partially convertible rupee was at 39.58/59 per dollar, slipping from the previous close of 39.54/55. It has fallen 1% since hitting a near-decade high of 39.16 last month.
“Global stock market indices, coupled with Indian stocks, could could lessen the value of the rupee,” said U. Venkataraman, head of treasury operations at IDBI Bank.
Still, the rupee did recover from an early low of 39.65, as some traders squared off long dollar positions in a bout of profit booking.
Shares in Asia fell again on Tuesday with financial stocks and exporters hardest hit on concerns that a slowing economy in the United States combined with accelerating price rises could lead to stagflation.
Indian stocks dropped 3.84% on Monday, their biggest fall in four months. Capital inflows have been a key driver for the stock market’s rally and the rupee’s near 12% rise this year. The Indian stock market was stronger in early deals on Tuesday.
Dealers said that the there was strong demand for dollars in the offshore rupee market, and that carry trades, where investors sell low-yielding currencies like the Japanese yen in favour of riskier, high-yielding assets like the rupee were being unwound.
Further, with the holiday season approaching, dealers anticipated oil companies would start buying dollars earlier than usual to meet monthly payments, which would put further pressure on the rupee.
The risk of intervention by central bank, which could nudge the rupee weaker towards year-end, also weighed on sentiment, dealers said.
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First Published: Tue, Dec 18 2007. 11 01 AM IST
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