Mumbai: The rupee fell to a fresh over seven-week low on Tuesday afternoon, reversing all its early gains, after the domestic stock market unexpectedly dipped in mid-morning trade.
Persistent dollar buying by oil importers and risk averseness of foreign investors also weighed on the unit, dealers said.
At 2 pm, the partially convertible rupee was at 45.27/28 per dollar, after falling to 45.33, its lowest since 24 September. It rose to as high as 45.08 in early trade. On Monday rupee had closed at 5.2250/2350.
Indian shares extended losses to as much as 2.4% so far on Tuesday, amid subdued Asian equities as Irish debt troubles drove investors away from risky assets.
Foreign inflows are tapering off as offshore investors begin to wind up their investments to avoid piling up risks close to the year’s end, dealers said.
Foreign funds sold 153.04 million of Indian stocks on Friday, data from the regulator shows, a sharp reversal from the $1.56 billion of total purchases on 4 and 5 November.
The dollar came off from early highs preventing a sharp slide in the rupee. The greenback touched a six-week high against the euro, but later retreated as Fed officials sounded a dovish tone and defended its easing policy.
The dollar index, which measures the dollar’s value against a basket of currencies, hit a six-week high of 78.744 earlier and was now up 0.02% at 78.526.
One-month offshore non-deliverable forward contracts were quoted at 45.4 to a dollar, weaker than the onshore spot rate, suggesting a bearish near-term outlook.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange were at 45.4025, 45.4050 and 45.4050 respectively, with the total traded volume on the three exchanges at an average moderate $4.5 billion.