ENM: Rupee near 3-week low on shares; dollar gains
MUMBAI: The rupee weakened to its lowest level in nearly three weeks on Thursday as a subdued start to the local sharemarket and overnight gains in the dollar versus major currencies weighed on sentiment.
At 10:35 am, the partially convertible rupee was at 45.63/64 per dollar, after hitting a low of 45.71, its weakest since March 5 and below its close of 45.60/61 on Tuesday.
Financial markets were shut on Wednesday for a local holiday. "Things are good so far as set targets are being hit -- EUR/USD at 1.3350 and Sensex (main share index) limiting its gains at 17,600 for support at 17,350 -- to push rupee into a higher end of set 45.25-75 range," said J.Moses Harding, head of global markets at IndusInd Bank.
"The medium/long-term fundamentals for rupee are strong given the robust foreign direct investment flows into core sectors and sustainability of short-term carry-trade flows over a long period of time," he said, adding that near-term view was still bearish. Dealers said a drop in other Asian units was also hurting the rupee, however, they would now watch the sharemarket for further direction during the day. The dollar held its strength against major currencies on Thursday with the euro hovering around a 10-month low as investors remained cautious over a rescue plan for heavily indebted Greece.
Most Asian currencies were weaker against the dollar on Thursday. Shares were trading down 0.2 per cent weighed by weakness in global stocks. Wall Street fell overnight as a credit downgrade on Portugal and a weak U.S. Treasury note auction fanned worries about sovereign debt. Foreign fund flows into the stock market are a crucial determinant of the rupee's fortunes.
Foreigners have so far in 2010 bought shares worth a net $3.4 billion, adding to record inflows of $17.5 billion seen in 2009. One-month offshore non-deliverable forward contracts were quoted at 45.76, 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 45.66 and 45.6575 respectively, with the total traded volume on the two exchanges at about $1.3 billion.
