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Rupee weakens more on Korean tensions

business Updated: Nov 24, 2010 11:15 IST

Mumbai: The Indian rupee weakened further on Wednesday as political tensions in North and South Korea weighed down currencies across Asia.

Traders said the rupee, which had slid to a two-month low in the previous session, would find support as exporters cash in their dollars. At 10:35 am, the partially convertible rupee was at 45.65/66 per dollar, compared with Tuesday's close of 45.57/58, when it had fallen to 45.6750, its lowest since September 23.

It should move in 45.50-80 band during the day, traders said.

"The rupee will mostly be rangebound and should get supported at lower levels as exporters are selling (dollars)," said a senior dealer at a foreign bank.

On Tuesday, the rupee had pulled off the day's low following a late recovery in the euro and dollar sales by exporters.

"We expect the dollar to remain rangebound against the Asians. We will also watch the stock market during the day," said a private bank dealer.

The dollar was at 1,146.80 won, after surging to 1,170.90 won earlier from around 1,125 won on Tuesday.

North Korea on Tuesday fired dozens of artillery shells at a South Korean island, killing two soldiers and setting houses ablaze, in one of the heaviest attacks on its neighbour since the Korean War ended in 1953.

The euro edged up from a two-month low on Wednesday, finding support after a massive sell-off sparked by the euro zone debt crisis and heightened tensions in the Korean Peninsula.

The dollar index, which tracks the greenback's performance against a basket of six major currencies was down 0.20 percent at 79.525. The index had rallied towards 79.800, its best level since late September in early trade.

Indian shares flip-flopped in early trade amid weak Asian markets as the Korean tensions weighed on investor sentiment.

Foreign portfolio funds have snapped up a record $28.9 billion worth of Indian equities so far this year, helping the benchmark stock index climb nearly 13 percent and pushing the rupee up 1.9 percent.

One-month offshore non-deliverable forward contracts were quoted at 45.91, 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, the MCX-SX and the United Stock Exchange were all at 45.6700. The total traded volume on the three exchanges was moderate at $1.05 billion.