Rupee snaps three-day gains on broad dollar rally post Fed minutes
The rupee declined by 13 paise to 60.74 against the US dollar in early trade on Thursday due to appreciation of the American unit against other currencies overseas.business Updated: Aug 21, 2014 17:36 IST
The rupee weakened slightly on Thursday, snapping a three-day rising streak, as the dollar rallied broadly after minutes from the Federal Reserve July meeting suggested potentially earlier-than-expected rate hikes.
The US dollar traded at 11-month highs against a basket of major currencies after the Fed's minutes suggested any strong jobs market recovery could lead it to raise interest rates earlier than it had been anticipating.
However sentiment remains broadly supported on strong foreign buying in Indian markets, especially in debt.
Foreign banks bought debt worth $2.44 billion on Wednesday, their highest since at least August 2009, clearing house data showed. Foreign funds have purchased $26.4 billion in debt and equities combined so far in 2014.
"Portfolio flows into stocks are expected to continue going ahead this year but heavy flows will prompt central bank buying. We should see the currency stabilise for now," said Param Sarma, director and chief executive officer at NSP Forex.
The partially convertible rupee closed at 60.67/68 per dollar compared with 60.61/62 in the previous session.
Data on Thursday showing growth in China's factory sector slowing to a three-month low in August also hit Asian currencies.
Analysts expect the rupee to remain broadly in a range given the central bank has tended to intervene at times when the rupee weakens suddenly or when the currency strengthens much below 60 to the dollar.
"Despite sentiment being positive on India, there is very strong resistance for the rupee at 60 levels. Very near-term the rupee may hold in a 60.50 to 61.00 range and between 60 and 61.80 in the medium term," NSP's Sarma said.
In the offshore non-deliverable forwards, the one-month contract was at 61, while the three-month was at 61.60