Mumbai: The rupee slipped on Monday as declines in Asian stocks raised worries about a withdrawal of foreign funds, though trade was subdued ahead of a possible interest rate cut at a central bank policy review on Tuesday.
At 9:50 a.m., the partially convertible rupee was at 39.425/435 per dollar, slipping from the previous finish of 39.365/37.
“The market is divided about whether the central bank is going to cut rates tomorrow, which is adding to the air of caution,” said a dealer with a private bank.
Seven of 13 analysts polled by Reuters expect a 0.25% cut in the repo rate at the Reserve Bank of India’s review on Tuesday, after last week’s Fed rate cut of 0.75%.
Shares in Asia fell on Monday, with Japan down around 3% and Hong Kong down more than 3%, as concerns over the health of the US economy returned to haunt stock markets, sending investors to seek safe haven debt.
The Indian market fell more than 4% in early deals, raising concerns that foreigner may be repatriating funds, which would remove a key support for the rupee.
The negative signals from stocks weighed on the rupee, which came under pressure in a turbulent previous week for shares.
Foreign funds sold around $3.6 billion of local shares in the seven sessions to Thursday, including sales of $620 million when the market rose 5.2% on Wednesday.