Rupee down as Europe struggles to tame debt crisis
MUMBAI |
MUMBAI (Reuters) – The rupee fell more than 1 percent on Monday on robust dollar buying by investors unconvinced about Europe’s ability to solve its debt crisis and stave off a debt default by Greece, with losses in world equities also weighing.
The partially convertible rupee ended at 47.815/825 per dollar, 1.17 percent weaker from its previous close of 47.26/27. The local benchmark share index too declined over 1 percent.
The rupee has declined in 9 of the past 11 sessions and touched a near two-year low of 48.02 on Sept. 14.
“The bearish sentiment in the euro zone is hurting the rupee. If the euro continues to fall and dips below$1.3450-1.3550 level, then some serious selling pressure may be seen in the rupee,” said Ashish Barua, a senior foreign exchange dealer with IndusInd Bank.
The euro was at $1.3669 at the end of rupee trade, sharply down from $1.3811 on Friday while the index of the dollar against six major currencies was at 77.082 points from 76.550 previously.
International lenders told Greece on Monday that it must shrink its public sector and improve tax collection to secure a vital 8 billion euro rescue payment next month.
A Reuters poll of more than 50 economists last week gave a 65 percent chance of a Greek default.
Back home, the near continuous decline of the rupee for almost two weeks was seen an indication of risk-off mood among investors as growth sputters in the United States and as Europe tries to solve its sovereign debt troubles, traders said.
A persistent current account deficit is also hurting the currency, but likely support from the central bank, a positive rate of economic expansion and high interest rate differential are expected to underpin the rupee.
“There seems to be a lot of inflows in the pipeline. And the central bank may not intervene to defend a level. But its mere presence is enough to put brakes on,” said a dealer with private-sector bank.
Last week, India raised the overseas borrowing limit for its companies to $750 million from $500 million, allowed firms to raise Chinese yuan-denominated debt and refinance rupee debt through overseas borrowing.
So far this month, foreign funds have bought nearly $340 million of local shares and sold $7 million in debt. In August, they had sold over $2.2 billion of equities and had purchased $681 million of debt.
All eyes are now on the action plan that is expected to be announced by the U.S. Federal Reserve at the end of its 2-day meeting starting Tuesday for cues on the trajectory of global growth.
The one-month onshore forward premium was at 13.75 points from 19 on Friday, the three-month was at 43 points from 53.75 and the one-year was at 104.25 points from 129.
The one-month offshore non-deliverable forward contracts were quoted at 48.04, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were at 47.8725, 47.8750 and 47.8800, respectively. The total volume was $7.44 billion.
(Editing by Malini Menon)
Article source: http://feeds.reuters.com/~r/reuters/INbusinessNews/~3/6IENqv6pNtI/idINIndia-59413920110919
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