Fund outflows on the back of weak equity markets, coupled with sustained dollar demand from oil companies, dragged the rupee to a new one-year low on friday.
“There was huge selloff in the Sensex. The fall in the rupee was in line with the global risk-off mood, nothing particular to the currency,” said Priyanka Kishore, forex strategist at Standard Chartered Bank here.
Also, oil importers continued to buy dollars, adding to the rupee’s weakness. On the other hand, exporters that sell dollars in the market were away from the trade, in expectation of an exchange rate closer to 47, market participants said.
Expectations that the rupee would weaken further against the greenback led to traders holding on to their dollars. “People are expecting the Monday rupee to open weaker. Hence, everyone, including most of the nationalised banks, went long for the weekend,” said Sandeep Gonsalves, forex dealer and consultant, Mecklai & Mecklai.
Traders took advantage of the arbitrage opportunity of eight-nine paise between the spot and forward market on friday. “Given the current uncertainties, the forward dollar is very cheap and affordable. The resultant demand-driven mode in the forward segment has brought rupee bears into the street and it would need much higher forex premium to bring the exporters into play,” said Moses Hardings, head-global markets group, IndusInd Bank.
Dollar gains abroad were supported by the six-month low fall of the euro. The euro was at $1.3807 at the end of trade here, weaker from $1.4040 when the rupee closed yesterday. The dollar index against six major currencies was at 76.614 points from 75.587 a day before.