The Indian rupee extended its losses on Tuesday as nervousness ahead of key US data weighed on sentiment and spurred some investors to cut positions in relatively risky assets like the local unit, dealers said. The partially convertible rupee ended at 40.9775/9875 per dollar, easing from Monday's 40.885/895.
The rupee hit a nine-year peak of 40.20 in July but then lost ground as investors pared emerging market assets amid uncertainty in global credit markets. "Everyone is waiting for cues from New York, and the early signs don't look good," a chief dealer with a foreign bank said.
US markets were closed on Monday for Labour Day, but US stock index futures looked set for a weaker Wall Street open on Tuesday ahead of a flurry of data, including a report forecast to show a dip in manufacturing activity. The yen strengthened, signalling a return to risk aversion with investors moving out of carry trades where they borrow low-yielding currencies to fund higher return assets like the rupee, dealers said.
Oil companies also bought dollars in the wake of rising crude prices. London Brent crude was trading near $73.5 a barrel. But dealers said eight successive days of gains in the benchmark index could lure overseas capital into local equities in coming days and support the rupee.
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