Mumbai: The rupee was pushed to one-week lows on Tuesday on the back of a broad dollar rally and losses in domestic shares which raised expectations for sustained risk aversion in global markets.
The partially convertible rupee closed at 46.91/92 per dollar, after hitting 46.98, its weakest since 12 Aug and 0.55% below 46.65/66 at close on Monday. The rupee traded in a range of 46.70-46.98 during the day.
“The euro and stocks came down and that coupled with some corporate dollar buying pushed the rupee down to these levels,” said A. Ajith Kumar, a senior foreign exchange dealer at Federal Bank in Mumbai.
“The next resistance is seen at 47.15 and if that is broken it could go down to 47.50-47.60 levels over 2-3 weeks.”
The yen struck a 15-year high against the dollar and a nine-year peak against the euro on Tuesday as investors and speculators tested the resolve of Japanese authorities to stem the yen’s steady rise.
“More than the euro moves today, yen appreciation has lead to the broad dollar rally,” said Kushal Maheswari, manager, forex dealing at state-run Union Bank.
“It has led to confirmation of the view of risk aversion among investors across the world and caused some correction in our stocks as well. All these together hurt the rupee.”
The index of the dollar against six majors was 0.4% higher while most Asian units too weakened compared to the US unit.
Traders said losses in domestic shares also hurt. Shares shed 0.5% as an anemic global economic recovery drove investors to dump stocks across world markets.
Share movements help determine the direction of capital flows which influence the rupee’s fortunes. Latest available data shows, so far this year,foreign investors have bought shares worth a net $12.4 billion, adding to last year’s record $17.5 billion inflow.
“The outlook going ahead is really difficult to state. However, Asia is the safest bet for investors as of now. The interest rate differentials will continue to attract flows towards India,” the treasurer at a private bank in Mumbai said.
“I do not forsee the dollar/rupee breaking 47.25 in the very near-term and expect it to head back towards 46 levels in September,” he added.
One-month offshore non-deliverable forward contracts were at at 47.18, weaker compared to the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 46.9475 and 46.9375 respectively, with the total traded volume on the two exchanges at about $4.4 billion.