BackRupee ends weak as equities slip
Rupee ends weak as equities slip
PremiumMumbai: The rupee bounced off a two-month low as the dollar fell against major currencies on Monday, but it still ended weaker as losses in the sharemarket renewed worries about foreign investors pulling out funds.
The partially convertible rupee closed at Rs49.08/09 per dollar, off an early low of Rs49.47 which was its weakest since 15 May but about 0.1% below its previous close of Rs49.01/02.
“It was mainly tracking the stock market today. The large fiscal deficit announced at the Budget and the reddish stock market have been playing havoc with the rupee," said V. Kumar, chief dealer with State Bank of Travancore.
The rupee dropped 2.4% last week, its biggest weekly drop since early March, when it had shed 2.8%.
Indian shares fell 0.8% to their lowest close in two months as worries about the health of the world economy and uncertainty over corporate earnings reduced risk appetite.
Foreign funds were net sellers of almost $200 million worth of shares on Thursday and Friday, but are still net buyers of about $5.8 billion so far in 2009.
Dealers said progress of the monsoon, important to demand in the domestic economy, would be closely monitored after a weak start in June.
“The rupee is likely to go downwards for some more time with 50.50 to 51.00 levels seeing some intervention as they are psychological levels," Kumar said.
The Reserve Bank of India (RBI) can buy or sell dollars either directly or via designated state-run banks to prevent excessive volatility in the currency.
The RBI sold a net $1.44 billion in May, even though the rupee rose 6% following the government’s re-election and a stock market surge.
The yen and euro gained against the dollar on Monday, with the yen hitting a five-month peak. The dollar index, a gauge of the US unit’s performance against six majors, was down 0.1%, offering some support to the rupee.
One-month offshore non-deliverable forward contracts were quoted at 49.20/30, weaker than the onshore spot rate.
In the currency futures market, the most-traded near-month contracts on the National Stock Exchange and the MCX-SX closed at 49.14 and 49.16 respectively, with the total traded volume on the two exchanges at $2.2 billion.
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