Rupee falls to 2-month low as world shares dip

Rupee falls to 2-month low as world shares dip

Mumbai: The Indian rupee dropped on Friday to over two month lows weighed by sharp falls in global stocks but dollar flows from exporters and custodian banks helped it recover from the lows.

Dealers said they were closely watching developments in Greece and the euro zone as it could be a key factor for future risk taking among investors and may impact the rupee.

US Treasury Secretary Timothy Geithner will discuss efforts to get aid to debt-stricken Greece with fellow finance ministers from Group of Seven nations Friday.

At 10:25am, the partially convertible rupee was at Rs45.60/61 per dollar, after hitting 45.73 at open, its lowest since March 5 and below its previous close of 45.31/32 on Thursday.

At the day’s low, the rupee was down 0.9% on the day and has shed 3% this week.

“We have recovered well from the day’s lows. Today’s range is a difficult call - but I think we would see a move below yesterday’s close, so range could be 45.75 towards 45.25," said R.K. Gurumurthy, head of treasury at ING Vysya Bank in Mumbai.

“There is the fear of intervention that could keep traders edgy - this day is full of events and risks - UK election, Germany and others finalising aid for Greece, non-farm payrolls in the US, G7 conference call to name a few," he added.

Traders said they would also watch the dollar’s move against major currencies for direction.

The pound and the euro nursed chunky losses on Friday after a global rout sent the dollar and yen soaring, with Asian share markets falling on a Wall Street sell-off and sterling hurt by election uncertainty. Most Asian currencies too were weaker against the dollar on Friday.

Indian shares were trading down 1% on Friday, en route to their second weekly fall in a row, as mounting fears over Europe’s debt crisis rocked world equities and drove investors away from risky assets.

Foreign fund flows are major movers of the local stock market and also have a substantial impact on the rupee’s fortunes. So far in 2010, foreign fund investments of a net $6.2 billion have helped the rupee gain 2.1%.

Last year record inflows of $17.5 percent had lifted the rupee up 12.2% from its record low of 52.2 hit in early March 2009 while the unit gained 4.7% on the year.

One-month offshore non-deliverable forward contracts were quoted at Rs45.75, 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 were at 45.68 and 45.6825 respectively, with the total traded volume on the two exchanges at about $1.7 billion.