Mumbai: The rupee fell to three-week low on Thursday as the dollar’s rise on an upbeat tone from the US Federal Reserve prompted importers to sell the local unit, with a softer stock market offering little support.
The partially convertible rupee ended at 46.88/89 per dollar, after hitting 46.97 during trade, its lowest since 27 November. It fell about 0.5% from Wednesday’s close of 46.655/665. “The dollar’s rally and corporate dollar demand were the two factors against the rupee. I am looking at a 46.80 to 47.0 range for tomorrow,” said a senior trader with a foreign bank.
One-month offshore non-deliverable forward contracts were quoted at 46.93/47.03, slightly weaker than the spot rate.
The dollar gained against majors, supported by an upbeat tone from the Federal Reserve, which expressed optimism on the US economy and reiterated its pledge to keep rates unusually low for “an extended period.”
The Fed left benchmark overnight rates on hold in the zero to 0.25% range, in line with expectations.
“The fall of the rupee was mostly driven by the dollar’s movement against the major currencies. Equities are behaving in a strict range and the closing is also flat. But the market does take a cue from the stock market,” said Paresh Nayar, head of money markets and foreign exchange at First Rand Bank.
The sharemarket is down 1.3% this week and flat on the month, which has raised some concerns that foreigners are selling local stocks to repatriate funds ahead of the year-end.
Foreign investors have bought $16.5 billion of Indian equities in 2009 up to mid-December, data from Nomura showed, helping drive a 75% rally in the main stock index.
The foreign inflows have also helped lift the rupee more than 11% from a record low of 52.2 in March.
In currency futures, the most traded near-month contracts on the National Stock Exchange and MCX-SX were at 46.9275, from Wednesday’s 46.72.