Mumbai: The rupee fell to within striking distance of a record low on Monday as local shares sank 2% to their lowest in nearly three and a half years, renewing fears more foreign investors may exit.
The partially convertible rupee ended at Rs51.85/87 per dollar, 0.38% weaker than its previous close of Rs51.65/71, off the intraday low of Rs52.01 hit in late deals.
It plummeted to a record low of Rs52.20 per dollar last week, and is down 1.5% so far this month. The rupee has shed 6.1% so far in 2009.
“Volumes have been thin and traders have been nervous to add fresh positions,” said a dealer at a foreign bank.
The currency market will be shut on Tuesday and Wednesday for holidays and traders said scattered dollar selling by the Reserve Bank of India around Rs52 per dollar capped sharper falls.
Capital flows in and out of the stock market have been a key driver for the rupee.
Foreign investors have sold about $2.3 billion worth of shares in 2009 after dumping more than $13 billion in 2008.
World stocks sank towards 14-year lows in a broad-based sell off, dragged lower by economic gloom in Europe and Asia.
One-month offshore non-deliverble forwards were quoting at Rs52.28/52.38, weaker than the onshore spot rate, indicating a bearish near-term outlook for the rupee.
Callum Henderson, global head of FX research at Standard Chartered Bank, said the dollar/rupee was in a consolidation phase but it should move further away from Rs52 per dollar soon.
“The break above 50.60 set the dollar-rupee up for the next upswing, with the minimum bull flag objective placed near 52.50,” he said in a note.