Mumbai: The Indian rupee fell to one-week lows ahead of a central bank rate decision on Tuesday, hit by losses in Asian stocks that raised worries of more capital outflows and on month-end dollar buying by oil importers.
At 9:17 a.m, the partially convertible rupee was at 42.71/72 per dollar, 0.4% weaker than its close of 42.55/56 on Monday. It had risen to 41.82 per dollar last week, its strongest since 12 May.
“Importers are in the market and stocks are expected to tank in opening trades, but it looks like a 42.60-42.80 band until the rate decision,” said a senior dealer at a foreign bank.
The Reserve Bank of India is widely expected to raise its key lending rate by 25 or 50 basis from 8.5% at a policy review, a Reuters poll showed.
Asian stocks tumbled on Tuesday after Merrill Lynch, the third-largest US investment bank, said it would take a $5.7 billion write-down related to bad debt, draining confidence in the financial sector.
Foreign funds have sold a net $6.6 billion worth of Indian shares so far this year, after having bought a record $17.4 billion in 2007. The capital outflows have weighed on the rupee, which has lost nearly 8% so far in 2008.
But analysts said the rupee may retrace some of its losses on Tuesday if the central bank raised interest rates.
One-month offshore non-deliverable forward contracts were quoting at 42.70/75 per dollar.