Mumbai: Rupee was weaker on Wednesday but off a three—week low struck in early trade after the local stock market halted a five—day slide and climbed.
The stock market has been the focus of currency traders after heavy foreign fund withdrawals piled pressure on the rupee over the past few months. Foreigners have sold Indian shares worth a net $13.1 billion in 2008.
At 10:22am, the partially convertible rupee was at Rs49.72/73 per dollar, 0.1% weaker than Rs49.66/67 at close on Tuesday. In early trade it fell to Rs49.8150, its weakest since 29 October.
Paresh Nayar, chief dealer at Development Credit Bank, said that there was support for the rupee at Rs49.80 but the outlook depended on how the stock market moved.
“The rupee opened weaker as some Asian markets were down,” he said adding: “The market is looking at how the stocks are going to behave, if they fall like they did yesterday, then the rupee may go down further.”
Indian shares rose more than 2% early after tumbling 15% in the previous five sessions.
One—month offshore non—deliverable forward contracts were quoting at Rs50.58/73, weaker than the onshore spot rate, indicating a bearish outlook for the rupee in the near term.
Dealers said that they expected the central bank to intervene if the rupee fell too drastically, but they were not sure at what level the central bank might want to step in.
The Reserve Bank of India (RBI) buys and sells dollars through state—run banks to curb excesssive volatility in the market and prevent any sharp appreciation or depreciation of the local unit.