The Indian rupee on Monday slipped in tandem with local stocks, which had their largest fall in 4 months, as global investors pulled out of relatively risky emerging market assets on raised concerns of a US slowdown.
The partially convertible rupee ended at 39.54/55 per dollar, sharply down from the previous close of 39.34/35. It hit a near-decade high of 39.16 last month. "The rupee's fortunes are going to ride on equities, which are looking jittery at the moment, " said a senior dealer with a private bank.
"If the stock market inflows stop, then the current level of outflows should drive the rupee towards 39.80 pretty soon," the dealer added. Emerging currency and equity markets fell as risk aversion grew and US inflation data hit prospects for further rate cuts, raising concerns that the Federal Reserve might not be able to prevent the world's largest economy from slipping into recession.
Dealers said there was strong demand for dollars in the offshore rupee market, indicating that carry trades, where investors sell low-yielding currencies in favour of high-yielding assets like the rupee, were being reversed.
Adding to the tentative mood were concerns India's central bank would act decisively to stem the rapid appreciation in the rupee, which has gained about 12 percent this year. The Reserve Bank of India bought $64.5 billion in intervention in the first 10 months of the year.
Comments
Comments are closed.