Mumbai: The Indian rupee extended its fall in afternoon trade on Tuesday on dollar demand from a UK bank for an offshore deal, dealers said.
At 2:05pm, the partially convertible rupee was at Rs46.66/67 per dollar, off a low of Rs46.76, its weakest in the last two weeks and below Monday’s close of Rs46.56/57.
A UK bank bought $500 million, which was responsible for the rupee’s fall, dealers said. The dollar index, a gauge of the US unit’s performance against six majors, was almost unchanged.
Dealers also said they were monitoring the sharemarket for cues on fund flows. For stocks report see
Rupee fell earlier after a firmer start as oil refiners bought dollars, following the US unit’s rise the previous day.
Oil is India’s largest import item and the refiners are the biggest buyers of dollars in the domestic foreign exchange market.
At 11:42am, the partially convertible rupee was at Rs46.625/630 per dollar, its weakest in almost two weeks. It had closed at 46.56/57 on Monday.
“There is some importer demand from oil companies because the levels are attractive,” said a foreign bank dealer.
The rupee had started stronger at Rs46.52/53 after Federal Reserve chairman Ben Bernanke said the US central bank was not going to raise rates despite the strong job data there.
“Bernanke’s comments were dollar bearish. But I expect the market to come down in the day as people have gone too short on dollar,” said Ashtosh Raina, head of forex, HDFC Bank.
The rupee had fallen sharply against the dollar on Monday after the better-than-expected US jobs data.
Traders said the Indian central bank chief’s comments late Monday on chances of control on capital flows if the inflows surge substantially did not have any impact as the comment was theoretical.
Foreign portfolio flows of almost $16 billion into Indian equities this year have helped the rupee rise nearly 13 percent from a record low of 52.2 in early March. Last year, net outflows of more than $13 billion had pushed the rupee down by a fifth.
In the non-deliverable offshore forwards, there was not much scope of arbitrage with one-month offshore non-deliverable forwards at Rs46.58/68, little changed from the spot rate.