Mumbai: The rupee eased against the dollar on Monday 30 July as investors cut back positions in the relatively risky local currency amid turbulence in equity and credit markets, dealers said.
At 9:45 a.m., the partially convertible rupee was at 40.57/58 per dollar, inching back from 40.62 hit in early trade. It ended on Friday (27 July) at 40.51/53 per dollar after hitting a nine-year high of 40.20 last week.
“The Sensex is going to give the rupee its direction today,” said a senior dealer with a private bank, referring to India’s benchmark stock index, which opened in negative territory on Monday, after falling 3.4% on Friday, its biggest decline in almost four months.
The rupee took its early cues from fellow high-yielding Asian currencies that fell against the dollar. Risk reduction was the predominant theme in the market for these currencies, as investors continued to exit carry trades, buying back cheaper currencies while selling high-yielding assets.
Concerns that a crisis in the US subprime mortgage market is turning into a broader credit crunch continued to weigh, dealers said
Big foreign inflows into local shares have been a key support for the rupee. Foreigners have bought nearly $10.5 billion worth of shares so far in 2007, just below a record $10.7 billion in 2005 and much higher than nearly $8 billion in 2006.
Dealers said dollar demand from oil refiners to meet month-end requirements, and unwinding of short dollar positions ahead of the Reserve Bank of India policy review on Tuesday, put further pressure on the local unit.