Rupee drops on broad dollar rally, outflows weigh

Rupee drops on broad dollar rally, outflows weigh

Mumbai: The rupee weakened to its lowest level in nearly a week on Tuesday hurt by broad gains in the US unit and bunched up dollar outflows, but further losses were averted by mild gains in the local share market.

The partially convertible rupee closed at 46.84/85 per dollar, 0.7% below its close of 46.53/54 on Monday.

“Euro was much weaker today while the dollar also gained broadly, hence the rupee fell. Stock gains failed to have an impact since New York was shut yesterday. The bunched up outflows and lack of inward remittances hurt," said Naveen Raghuvanshi, an associate vice president with Development Credit Bank.

“Re-testing of 47.00 levels for the rupee seems likely only if the euro breaks $1.27 levels, until then 46.85-4690 should hold on the topside for the dollar and 46.50 still seems like a good support," he added.

The euro fell broadly on Tuesday after rekindled concerns about the European banking sector prompted investors to sell higher-risk currencies. The index of the dollar against six major currencies was up 0.7%.

Indian shares climbed 0.5% and hit their highest level in 31 months for the second day, bolstered by rising foreign investor interest in the fast-expanding economy.

Foreign funds have bought shares worth $13.4 billion so far in 2010, in addition to last year’s record $17.5 billion purchases.

One-month offshore non-deliverable forward contracts were quoted at 47.03, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 46.99 and 46.9925 respectively, with the total traded volume on the two exchanges at about $4.8 billion.