The rupee weakened for the first time in four days on concern that a slide in the equity markets will reduce investor appetite for local assets.
The rupee fell the most in a week after the International Monetary Fund (IMF) said Asian economies face a “long recovery ahead” from the global slowdown.
The Bombay Stock Exchange’s Sensitive Index (Sensex) lost 1.5 per cent, the most since April 28.
An index that tracks the dollar against six major currencies rose for a second day, indicating demand rose for the US currency.
“The rupee is under pressure, as equity losses signalled risk-aversion among investors could increase,” said Ritwij Mahant, a Mumbai-based currency trader at IndusInd Bank. “In addition, the dollar is stronger abroad.”
The rupee declined 0.7 per cent to 49.65 per dollar at close of trade, according to data compiled by Bloomberg. The currency gained 2.2 per cent so far this quarter.
Offshore contracts indicate traders expect the rupee will drop to 49.67 in a month, compared with bets for a rate of 49.33 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, Swiss franc and Sweden’s krona, climbed 0.1 per cent, adding to yesterday’s 0.2 per cent advance.
Overseas funds bought $296 million more Indian shares than they sold this month, according to data released by the Securities and Exchange Board of India (Sebi).
The IMF said growth in Asia – including Japan, Australia and New Zealand – will probably slow to 1.3 per cent this year, from 5.1 per cent in 2008.
