Mumbai: The rupee fell for a third day this week as concern that the worst of the global economic slump isn’t yet over prompted foreigners to trim their local holdings of stocks.
The currency closed at a one-month low as overseas funds sold more Indian shares than they bought for a third straight day and the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, posted its biggest two-day decline since 3 March. The UK’s statistics office reported on Thursday that retail sales unexpectedly dropped in May for the first time in three months, while Germany said risks to its economy, Europe’s biggest, are still unusually high.
Global funds are far from confident about the prospects of equities in developing nations which is resulting in outflows, said K.V. Mallik, treasurer at state-owned UCO Bank in Kolkata. I don’t think the trend will reverse anytime soon and the currency will bear the brunt.
Weak position: The rupee fell 0.1% to 48.215 a dollar, the lowest since 15 May, while the Sensex had its biggest two-day decline since 3 March. Rajkumar / Mint
The rupee fell 0.1% to 48.215 a dollar in Mumbai, according to Bloomberg. That is the lowest since 15 May.
Global investors sold a net $241 million in the three days to 17 June, according to market regulator Securities and Exchange Board of India, trimming this month’s purchases to $1.1 billion. The currency has rallied 5.2% this quarter.
The rupee rose as much as 0.4% earlier on Thursday on speculation exporters will take advantage of its drop past 48 to convert overseas earnings.
Exporters have been eyeing opportunities to cash in on the rupee’s weakness, said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd in Mumbai. I expect this trend to continue so long as the rupee trades at levels weaker than 48 per dollar.
Offshore contracts indicate traders bet the rupee will trade at 48.40 per dollar in a month, compared with expectations for a rate of 48.28 on Wednesday.