Mumbai: Rupee slipped in late trade on Wednesday, posting its weakest close since early December, as the dollar’s strength against major currencies overpowered its early gains on a rising sharemarket.
The partially convertible rupee closed at its low for the day of Rs49.96/97 per dollar, off a high of Rs49.72 and 0.2% below its previous close of Rs49.87/88. It was the weakest close since 3 December and took its losses this year to 2.5%.
“There was some dollar buying coming in during late trade as the US unit strengthened against other cross currencies overseas,” a senior dealer at a foreign bank said.
The dollar index, a gauge of the US unit’s performance against the majors, was up 0.3% at 5:00pm.
The dollar gained as concern about the global economy crept back in to boost the perceived safe-haven currency, while the yen continued to fall broadly.
“More or less the rupee has been recently moving just tracking the euro’s performance and the stocks. There doesn’t seem to be any specific demand in the market as such. It is likely to stay like this for a while at least,” said Naveen Raghuvanshi, an associate vice president at Development Credit Bank.
After two days of falls, the sharemarket rose as much as 2% during trade, before ending up 0.9%. Banks lead the rise on renewed hopes for a rate cut to boost consumer spending and stem a slowdown in growth.
The rupee tends to benefit from a rise in the share market as it is expected to lead to foreign investment inflows.
However, the stock market is down 7.7% so far in 2009 and foreign investors have sold about $1.5 billion worth of shares, after dumping more than $13 billion last year when the rupee fell 19.1%.
Standard & Poor’s decision on Tuesday to downgrade the outlook on India’s credit rating to negative from stable increased the risk of further depreciation of the rupee in the near term, Morgan Stanley economists said.
The rupee could test Rs52-53 per dollar in the next 4 to 6 months on balance of payments pressures, they said.