Mumbai: The rupee eased on Friday on concerns that overseas investors would withdraw funds from a falling stock market, though the prospect of further interest rate cuts by the US Federal Reserve offered some support.
At 9:50 am, the partially convertible rupee was at 39.95/96 per dollar, softening a touch from the previous finish of 39.93/94.
“The equity markets are the key, because it’s driving the flow of funds,” said the chief dealer with a foreign bank.
India’s benchmark share index fell more than 1% in early deals, with concerns about record oil prices and a US economic slowdown keeping investor sentiment cautious.
Foreign buying of local equities was a key driver of the rupee’s 12.3% rise in 2007.
Fresh evidence that the US economy was in recession sent Asian stocks lower, with Tokyo shedding almost 2% as investors took shelter in the relative safety of government debt.
The dollar hovered near two-week lows versus the euro on Friday after data showed the weakest regional factory activity since the last US recession in 2001 boosted expectations for a large Federal Reserve interest rate cut.
The Federal Reserve said this week it had lowered its economic growth forecast. The Fed cut its lending rate by 1.25 percentage points in January in an effort to prevent a recession.