Rupee slips on weak stocks, politics watched

Rupee slips on weak stocks, politics watched

Mumbai: The rupee slipped on 22 October, with dealers concerned that a weakening stock market would spur capital outflows and also worried about tensions between the federal government and its communist allies.

At 10:10 am (0440 GMT) the partially convertible rupee was at 39.865/875 per dollar, lower than Friday’s close of 39.73/74.

“The market has very little clarity at the moment, but the general perception is that the rupee is going to weaken," said a dealer with a private bank.

The rupee’s losses were capped by a European bank that aggressively sold dollars around 39.90. A dealer at the bank refused to comment, but the market speculated it could be on behalf of an Indian company that had raised the funds overseas.

Dealers said that investment flows in and out of the stock market would be the predominant factor determining the direction of the rupee.

With the benchmark index trading weaker for the fourth session in the row, the local unit would likely come under further selling pressure, dealers added.

The market was also concerned by tensions between the government and its communist allies.

India’s main communist party, which has threatened to withdraw support to the government over a nuclear energy deal with the United States, on Friday called for a ban on participatory notes to curb foreign fund flows into shares.