Rupee weakens as shares turn down

Rupee weakens as shares turn down

Mumbai: The Indian rupee fell 1 percent on Thursday on worries foreigners would keep pulling funds out of a falling share market, but dollar sales by some foreign banks helped contain the losses.

At 10:15 a.m. (0445 GMT), the partially convertible rupee was at Rs47.68/70 per dollar, off a low of Rs47.96, at which point it was one percent weaker than Wednesday’s close of Rs47.46/70.

“The rupee opened lower on expectations there will be more outflows from the equity markets, but then some foreign banks sold dollars," said a senior dealer with a private bank.

Indian shares opened down 3.6% after investor fears of a deep and prolonged recession in the United States hit Wall Street and Asian markets.

Foreigners have already sold a net $12.7 billion worth of Indian shares so far in 2008, after buying a record $17.4 billion last year. The rupee is down about 17.4%.

One-month offshore non-deliverable forward dollar/rupee contracts were quoting at Rs48.17/37, weaker than the onshore spot rate, indicating a bearish near-term outlook for the rupee.

Dealers said gains in the dollar against other currencies also weighed on sentiment. The euro and sterling fell against the dollar, pressured by expectations that the European Central Bank and the Bank of England would cut interest rates to prevent their economies from deteriorating further.