May 26 (Bloomberg) -- India’s rupee weakened, extending its slide from a five-month high, after overseas investors trimmed their holdings of the nation’s stocks and a technical indicator suggested the currency would fall.
The rupee slid for a second day versus the dollar, following its biggest weekly gain in 13 years, as concern about nuclear weapons tests by North Korea bolstered demand for the perceived safety of the greenback. It also fell on speculation local companies are taking advantage of recent strength to settle month-end import payments, said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in Mumbai.
“The rupee is weaker as equity-market sentiment is jittery across the region,” Paul said. “Also, dollar demand from importers is expected to pick up before the month ends.”
The rupee declined 0.7 percent to 47.60 per dollar as of 10 a.m. in Mumbai, after yesterday sliding 0.4 percent, according to data compiled by Bloomberg. It jumped 4.9 percent last week and reached 46.99 on May 22, the strongest level since Dec. 19. The currency may trade between 47.25 and 47.75 today, according to Paul.
Funds based abroad sold India stocks worth $147 million more than they bought on May 22, the most since March 3, according to latest figures from the Securities and Exchange Board of India.
The rupee’s 14-day relative strength index, a technical gauge derived by averaging daily gains and losses, was 25 at the end of last week and 28 at yesterday’s close. A reading below 30 indicates to some investors the currency is likely to weaken.
Regional Weakness
Offshore contracts indicate traders predict the rupee will trade at 47.66 to the dollar in a month, compared with expectations of 47.46 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Nine of Asia’s 10 most-used currencies excluding the yen weakened today against the dollar after North Korea yesterday conducted a nuclear weapons test for the first time since October 2006. South Korea isn’t ruling out the possibility its communist neighbor will conduct further underground explosions, Yonhap News Agency reported.
Source : www.bloomberg.com