ET: Indian rupee near 6-week low; shares, dlr watched
MUMBAI: The Indian rupee weakened towards recent six-week lows on Thursday as a shaky start to local shares and broadly lower Asian peers weighed, and traders were watching the dollar's moves versus majors for cues. By 10:30 a.m. (0500 GMT), the partially convertible rupee was at 47.33/34 per dollar, after touching 47.35 and 0.4 per cent weaker than Wednesday's close of 47.16/17.
On Monday, the rupee had dropped as low as 47.3850, its weakest since June 7. "The rupee opened with a gap tracking shares but is largely steady now," a senior dealer with a foreign bank said, predicting a range of 47.25 to 47.45 for the day. "We may see some more weakness this week. The rupee may go down to 47.50 by tomorrow," he said.
Indian shares shed 0.5 per cent, with financials leading the dealing, tailing weak Asian markets. Buying or selling of stocks by foreigners is a key factor that drives the rupee. So far this year, foreign funds have bought a net $8.8 billion worth of shares, adding to record inflows of $17.5 billion last year. The rupee is forecasters' top bet for appreciation among BRIC currencies, a new survey shows, as the growing economy draws foreign investors.
J. Moses Harding, head of global markets at IndusInd Bank, said the rupee would be in a consolidation mode in the near term after a sharp fall seen this month and suggested that importers must take stock and remain hedged. So far in July the rupee has shed 1.9 per cent and dealers expect the near-term bearishness to continue for a while. "The risk-reward is clearly in favour of staying long dollars given the weak global cues and resultant pressure on Indian economy through a widening trade gap and reduced offshore flows into the capital account," Harding said in a note.
Most Asian currencies also weakened against the dollar. However, the index of the dollar against six major currencies was 0.3 per cent lower. The dollar slid towards a recent seven-month low versus the yen on Thursday after Federal Reserve Chairman Ben Bernanke expressed concern about the US economy but steered clear of hinting about further easing as some had hoped.
One-month offshore non-deliverable forward contracts were quoted at 47.56, 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 both at 47.3475, with the total traded volume on the two exchanges at about $745 million.
