Mumbai: The Indian rupee was unable on Friday to mount a recovery from its sharpest one-day fall in more than 12 years as it was weighed down by expectations of rate cuts and the stock market losing some of its early momentum.
A sharp fall in annual inflation to 8.98% in early November, its lowest since early May and well below market forecasts, has raised expectations of further cuts in interest rates, which could weaken support for the rupee.
At 10:36am, the partially convertible rupee was at Rs49.45/46 per dollar, more than a quarter of a percent down from Wednesday’s close of Rs49.30/32 per dollar, when it fell 2.4%, its biggest daily fall since February 1996.
The currency market was shut on Thursday for a holiday.
Stocks rose as much as 3% in early trade but had turned negative within the first hour despite strong gains elsewhere in Asia.
Foreign fund selling of shares has also been a key factor in the rupee’s weakness this year. They have so far sold a net $12.7 billion worth of shares after buying a record $17.4 billion last year.
The rupee hit a record low of Rs50.29 per dollar in late October. After gaining more than 12% against the dollar in 2007, it has fallen more than 20% this year.
One-month offshore non-deliverable forwards were quoting at Rs49.81/49.96 per dollar, weaker than the onshore rate.