Mumbai: he rupee weakened on Monday, giving up all its intraday gains, as worries over the euro zone’s financial problems bolstered the dollar and triggered a fresh wave of demand from importers, mainly refiners.
The partially convertible rupee ended at 46.98/99 per dollar, after rising as high as 46.5950, but weaker than its 46.95/96 close in the previous session. The local unit hit the day’s low of 47.03 towards the close of trade.
Last Friday, the rupee was down 3.8% on the week, its highest fall since an 11.7% dive in mid-July 1996.
“The whole move for the rupee is linked to two factors. The dollar gained against the euro and pound and equity market gave up its gains. Therefore, the rupee weakened from 46.60 to 47,” said Paresh Nayar, head of foreign exchange and money markets at First Rand Bank.
The euro fell sharply across the board on Monday, pulling back from a short-covering rally, after the Spanish central bank’s takeover of a savings bank on Saturday underlined structural problems facing fiscally fragile euro zone states.
The dollar index against six majors was up more than 1%.
A reversal in the rise of local share prices also hit sentiment. The BSE benchmark Sensex gave up gains, having risen as much as 1.9% in early trade, to close 0.15% higher on Monday.
“The range for the rupee may be 46.80 to 47.25 per dollar for tomorrow (Tuesday),” said a senior dealer with a foreign bank.
Foreign capital in local shares is a key driver of the rupee. Foreign investors have been net sellers of nearly $1.5 billion of local equities so far in May, but are still net buyers of more than $5 billion so far in 2010.
One-year offshore non-deliverable forwards were quoted at 48.16 per dollar.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX both ended at 47.01, with the total traded volume on the two exchanges at about $8.2 billion.