The Indian rupee weakened on Thursday as shares shrugged off surprise interest rate cuts and slumped to their lowest in more than three years, while a stronger dollar overseas added to the downward pressure.
Foreign capital is a key driver of the rupee and foreigners have sold more than a net $2 billion of local shares in 2009, cutting their exposure to riskier assets amid the global economic crisis. That added to sales of more than $13 billion in 2008.
The partially convertible rupee ended at 51.76/78 per dollar, off a high of 51.47 and 0.44 percent below its Wednesdays close of 51.53/55. "Foreign investors are dumping stocks and expectations of a further fall in share prices has put downward pressure on the rupee," a trader with a state-run bank said.
On Tuesday evening, after the rupee had slumped to a record low of 52.20, a deputy governor of the Reserve Bank of India said market developments were being monitored and the central banks policy was to manage excessive volatility. While lowering its policy rates, the Reserve Bank of India said the countrys growth had been hit more than expected by the global financial crisis and downturn. Traders said the dollars strength also weakened sentiment for the local currency.
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