The rupee saw its first weekly drop in two months on concerns that a slide in the Bombay Stock Exchange’s Sensex will spur overseas funds to sell local stocks.
The currency fell for a fourth day on Friday as overseas investment rules, to be set next week, may curb record capital inflows into stocks. Market regulator Securities and Exchange Board of India this week said it plans to put restrictions on global funds buying offshore derivatives linked to local shares.
“The rupee may weaken more as stocks are likely to see a further downward correction,” said L.V. Prasad, chief currency trader at IndusInd Bank Ltd in Mumbai.
The rupee declined 0.9% this week to 39.73 per dollar at close.It fell 0.5% on Thursday, the biggest one-day decline since 16 August.