Mumbai: The rupee fell by 12 paise on 14 August to close at a six-week low of 40.7450/7550 against the greenback on fresh dollar demand amid a firm dollar overseas.
Capital outflows and some downward pressure on the Asian markets, including India, also weighed on the rupee.
In active trade at the Interbank Foreign Exchange (forex) market, the local currency opened slightly lower at 40.64/66 from yesterday’s close of 40.6250/6350 per dollar.
It later tumbled further to settle at a six-week low of 40.7450/7550 per dollar. It gyrated in a range of 40.62 and 40.77 a dollar.
Previously, the rupee had ended at 40.83/84 a dollar on 28 June, 2007.
Sustained dollar demand from state-run banks and oil refiners in the face of absence of supplies from exporters mainly put pressure on the rupee, forex dealers said.
The dollar on 13 August reached its strongest level in more than a month against the Euro and was also firm against other major currencies, boosting the dollar sentiment.
Higher than expected US retail sales report for July also lent support to the dollar in overseas market.
Lacklustre equity markets with downward bias also dampened the rupee sentiment further as dealers expect more more capital outflows in near term.
After being net sellers in the last two weeks, Foreign Institutional Investors (FIIs) pulled out $101 million on 13 August.
The rupee eased as traders were tentative after Asian stocks dipped on 14 August, fuelling concerns that overseas investors would trim holdings in local equities amid weakening appetite for relatively risky assets.
At 9:45 a.m., the partially convertible rupee was at 40.66/67 per dollar, slightly off yesterday’s (13 August) 40.625/635. It hit a nine-year high of 40.20 last month, with foreign buying of local stocks providing support.
“It’s a wait and watch game today, there’s a fair amount of uncertainty at the moment,” said a dealer with a private bank.
Asian stocks succumbed to modest selling pressure following a negative lead from Wall Street, which put most of the region’s currencies on the defensive, despite nervousness over the dangers of a credit squeeze easing somewhat.
Local traders said they would closely watch India’s benchmark index for cues about the rupee’s direction.
Foreign portfolio holdings stand at more than $9.6 billion this year despite sales since late July, compared with an inflow of $7.9 billion in 2006.
Overseas investments in local stock have been a key support for the rupee, which has gained nearly 9% this year against the dollar, to be Asia’s best performing currency.
Still, the rupee’s gains have been persistently capped by the central bank, and data on 13 August showed the Reserve Bank of India bought $3.19 billion in intervention in June, lower than $4.43 billion in May, to take its dollar purchases in 2007 to $26.7 billion.