Mumbai: The rupee dropped on Monday as a fall in the sharemarket raised expectations foreign investors may have sold some local holdings, taking its losses for August to 1.8%, its biggest fall in six months.
The partially convertible rupee closed at Rs48.83/84 per dollar, 0.4% weaker than its previous close of Rs48.65/66.
The unit’s fall in August was its biggest since its 4.4% decline in February, which came just before it hit its record low of Rs52.2 in early March.
“It was a volatile session today. These days there is a very high correlation with the stock market, so some dollar buying was seen on that front, but most of the month-end demand was over last week itself so that pressure was not there,” said Ashutosh Khajuria, head of treasury, at IDBI Bank.
Indian shares shed 1.6% on Monday, snapping a 7-day winning streak with their biggest fall in two weeks as equity markets worldwide slid on profit-taking after a recent rally.
Foreign funds have bought $8.3 billion worth of local shares in 2009, after being net sellers of more than $13 billion last year.
Dealers said data showing the economy grew 6.1% in the June quarter from a year earlier had little impact as it was in line with expectations and a weak monsoon has confused the outlook.
“Rupee’s direction will now be a function of how the equity markets behave over the week. Its likely to be in a range of 48.50-49.00 for the week,” Khajuria said. “Some amount of appreciation for the rupee looks possible this week, more than a probability of it weakening past 49.”
One-month offshore non-deliverable forward contracts were quoting at 48.88/98, slightly weaker than the onshore spot rate
In the currency futures market, the most traded near-month contract on the National Stock Exchange and MCX-SX closed at 48.9075 and 48.91 respectively, with the total traded volume on the two exchanges at about an average $1.7 billion.