The rupee fell to a fresh 10-month closing low on Friday as foreign investors took advantage of an arbitrage opportunity between the offshore and onshore forward market to buy dollars, dealers said.
Their buying came on a day when the stock market extended losses into a third day, sparking concern about a foreign fund outflow. The latest data showed foreign funds had sold a net $129.4 million of Indian equities on Thursday.
Traders said dollar purchases by oil companies to fund imports also weighed on the rupee.
The partially convertible rupee ended at 44.38/39 per dollar, its lowest level since December 10 when it ended at 44.7650/78, and weaker than the previous close of 44.28/2850.
It has shed 0.8 percent during the week on heavy demand for dollars for import payments from defence and oil companies.
"There was sustained dollar buying through the non-deliverable forward route, which put pressure on the rupee," said K.D. Lamba, chief foreign exchange dealer at state-run Bank of Baroda.
Non-deliverable forwards (NDFs) are used by foreign investors and large companies for arbitrage between the offshore and onshore forward markets, while foreigners often use them to invest in India or repatriate profits to their home country.
Comments
Comments are closed.