Rupee falls on risk aversion; US concerns weigh

Rupee falls on risk aversion; US concerns weigh

Mumbai: The rupee weakened on Monday, dragged by a weak euro and negative local shares, on renewed concerns that the United States may be slipping back into a recession which prompted investors to dump riskier assets.

The partially convertible rupee ended at 45.9850/9950 per dollar, 0.4% weaker than Friday’s close of 45.79/80, after trading in a 45.8450-46.0200 band intraday.

“Sentiment for the rupee is weak because of the uncertainty in Europe and the US," said Naveen Raghuvanshi, an associate vice president at Development Credit Bank.

“I see it touching 46.25 by mid-September," he said, which is its lowest level in nearly a year.

The Indian unit had weakened to 46.2150 on 25 August, a level last seen on 16 September 2010.

Foreign institutional investors have sold local shares worth $2.2 billion in August, after being net buyers of $1.7 billion in the previous month, raising concerns over foreign fund outflows.

Indian shares fell 0.64%, snapping a three-day winning streak, on renewed concerns the United States may slip back into recession and Europe faced a series of risks that could reignite its debt crisis.

US employment growth ground to a halt in August, reviving recession fears and piling pressure on both President Barack Obama and the Federal Reserve to provide more stimulus to aid the frail economy.

The euro also fell broadly on Monday, touching a three-week trough versus the dollar as worries about Greek and Italian public deficits and a regional election rout for Germany’s ruling party cast more doubt on the euro zone’s ability to tackle its debt crisis.

The euro was at $1.4122 at the end of local trade on Monday, from its $1.4249 previous close.

The index of the dollar against six major currencies was at 75.056 points compared with its 74.506 close at the end of domestic forex trade on Friday.

“The rupee was weaker because of the risk aversion sentiment. But dollar selling by some corporates prevented a sharper drop," a senior trader with state-run Andhra Bank said.

The one-month onshore forward premium was at 9.50 points from 11.75 points on Friday, the three-month at 34 points from 37.75 and the one-year at 125.50 points from 134.

The one-month offshore non-deliverable forward contracts were quoted at 46.12, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange were at 46.0625, while those on the MCX-SX and the United Stock Exchange were both at 46.0600, with the total volume at $5.9 billion.