Rupee weakened on broad dollar rise
The Rupee weakened today, drifting away from the near one week high reached in the previous session, weighed down by broad gains in the dollar versus major currencies.business Updated: Dec 15, 2010 11:17 IST
The Rupee weakened on Wednesday, drifting away from the near one week high reached in the previous session, weighed down by broad gains in the dollar versus major currencies. Weak local shares also played a part in the drift. At 10:35am, the partially convertible rupee was at 45.25/26 per dollar, weaker than 44.945/955 at close on Tuesday, when it had risen to 44.94, its strongest since December 8.
"Other Asian currencies like the Korean Won are a bit weaker. Dollar too in general has strengthened a tad since last evening and equity markets are a bit nervous as foreign funds have been selling this month," said Ananth Narayan G, head of Fixed Income, Currencies and Commodities at Standard Chartered Bank. "I think the rupee will remain subdued till end of year. Think Q1 2011 will be good for the rupee though typically trade deficit is low in Q1, plus we could have a few initial public offerings boosting capital flows."
In other currencies, the dollar rose on Wednesday after upbeat US economic data helped to send US yields higher, although thinning volumes into the year end meant trading was choppy. The index of the dollar against six major currencies was up 0.24% at 79.554 points.
In the market, traders expect the rupee to trade in a broad range of 45.15-45.30 intra-day. However, shares dropped 0.3%, tracking mostly weak Asian markets, as investors consolidated positions after the main index rose for three straight days.
Foreign funds operating in the country had dumped a net $842.75 million worth of shares last week and sold another $52.5 million on Monday. However, total foreign fund inflows so far in 2010 still stand at $28.4 billion, on top of the $17.5 billion purchased last year. As of Wednesday, one month offshore non deliverable forward contracts were quoted at 45.56, weaker compared to the onshore spot rate.
In the currency futures market, the most traded near month dollar rupee contracts on the NSE, MCX-SX and United Stock Exchange were at 45.34, with the total traded volume on the three exchanges at about $1.3 billion.