MUMBAI: The Indian rupee slipped on Tuesday, matching a six-and-a-half-month low touched last week, as traders braced for more equity outflows in the wake of diminishing global risk appetite. Traders said a weaker euro also weighed on the rupee, but inflows from an auction of third-generation (3G) mobile licences could provide respite.
At 10:45 a.m., the partially convertible rupee was at 47.21/22 per dollar, half a percent weaker than 46.98/99 at close on Monday. It touched 47.33 in early trade, matching its weakest level since Nov. 3, 2009, which was also hit on Friday.
Last week, the rupee had fallen 3.8 percent in its biggest weekly drop since an 11.7 percent dive in mid-July 1996. So far this week, the rupee is down 0.5 percent. "The rupee is unlikely to drop further today; hearing some flows from the 3G auction. Also heard of some inflows related to Essar and Abbott as well," said Vikas Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.
Abbott Laboratories Inc has said it would pay $2.12 billion up-front and make annual payments of $400 million for four years from 2011 to acquire the branded generics business of Piramal Healthcare. The 3G auction yielded the Indian government Rs 67, 700 crore ($14.3 billion), nearly twice of what it had expected.
The government has asked firms who have won the spectrum to pay the money by May 31. The inflows are expected to limit the downside for the rupee. Traders predicted a range of 47.15-47.40 during the session and said 47.40 was a strong support level. The main stock index fell more than 1.5 percent early as Asian shares dropped on concerns over Europe's debt woes.
Foreign funds have pulled out $1.8 billion from Indian stocks, reducing net inflows in 2010 to $4.8 billion. The withdrawals were a key factor for the rupee's fall this month. The euro slid on Tuesday as concerns about a broader contagion to the banking sector from the sovereign debt crisis in the euro zone drove investors to sell the single currency.
The index of the dollar against six major currencies was up 0.6 percent. One-month offshore non-deliverable forward contracts were quoted at 47.45, weaker than the onshore spot rate, suggesting a bearish near-term outlook. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 47.2150, with the total traded volume on the two exchanges at about $2.3 billion.
