Rupee slips on concerns about stock market

Rupee slips on concerns about stock market

Mumbai: The rupee slipped from near decade highs on 2 November on concerns that overseas funds may trim positions in equities after US stocks took a hit from renewed jitters about the fallout from the subprime credit crisis.

At 9:40 a.m., the partially convertible rupee was at 39.43/44 per dollar, under pressure in early deals. It had closed at 39.310/315 on Thursday (1 November), after rising to 39.22 during trading, its strongest since March 1998.

“The equity market sell-off in the US is likely to have a negative bearing on the Sensex, and the market is postioning itself for some outflows," said the chief dealer with a foreign bank.

Financial stocks dragged Wall Street sharply lower on Thursday, after brokerages downgraded Citigroup and Bank of America, sparking more fears about the fallout from the credit crisis.

The main Indian stock index (Sensex) ended weaker on Thursday, though it has gained about 26% since the US Federal Reserve cut rates in September. The Fed cut rates again earlier this week.

Overseas investors have pumped more than $17 billion into Indian equities this year, and these funds have been a key driver of the rupee’s gains of about 12%.

Dealers were also cautious about building positions in the rupee after the central bank was widely seen interevening to cap the currency’s gains on Thursday.

The central bank bought nearly $40 billion in the first eight months of this year to check the rupee’s rise, and analysts said it had intervened through September and October.

Swiss Bank UBS estimated the central bank bought $16 billion through intervention in September, which would be a record for a single month. --------------------------------------------------------------