The rupee may continue to rule weak against the dollar in the early part of next week, on the effect of heavy selling in stock markets by foreign institutional investors (FIIs).
The rupee lost about 1 per cent of its value in a week to close at 45.75 on Thursday, according to Bloomberg data.
The treasury head with a large public sector bank said the rupee was expected to weaken further, as foreign funds were pulling out.
The 30-share Bombay Stock Exchange benchmark Sensex plunged nearly 698 points (4.14 per cent) to end at 15-month low. The index closed at 16,142 on August 19.
FIIs continued their selling spree. Their net sale from equity were just over $440 million in the week ended August 19, according provisional data released by BSE. They have pulled out over $1.5 billion in the current month so far.
Alpari Financial Services (India) CEO Pramit Brahmbhatt said: “The rupee continued to depreciate for the third week. FIIs were net sellers in Indian equity market in the current month. This helped the greenback gain against the rupee.”
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The pressure on the rupee might ease in the later part of the week, once oil importers’ dollar requirements for overseas purchases had been taken care of, he said.
While domestic and international factors will influence rupee movement, it is the former, like FIIs’ activity, that has a dominant effect.
The European debt problems and the murky US economic data released on Thursday indicate the world may be going into another recession, hitting the market sentiment globally.
The dollar had already weakened against major international currencies and there was not much room for it to depreciate further, Brahmbhatt added.