The Indian rupee weakened on Monday as concerns rose over the eurozone growth prospects and its impact on the world economy after Spain’s downgrade.
Demand for dollars from oil refiners also weighed, but traders said economic growth data at 11:00am could provide direction.
At 10:20am, the partially convertible rupee was at Rs46.48/49, weaker than Rs46.35/36 at close on Friday. The unit had risen 1.3% last week.
Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market with their demand tending to peak at the end of each month when they make payments.
“We are seeing some reaction to the Spain downgrade,” said Vikas Chittiprolu, a senior forex dealer with state-run Andhra Bank, adding he expected the rupee to recover later in the day taking cues from the stock market.
India’s economy probably grew 8.7% in the March quarter from a year earlier, its strongest since December 2007, the median forecast of 20 economists showed.
Chittiprolu said if the data beat the forecast it would boost the rupee.
The main stock index rose 0.2% on hopes for stronger economic data.
Foreign fund flows into and out of the sharemarket are key for the rupee’s direction. So far in May, foreigners have pulled out a net $2.3 billion from shares, in their biggest pullout since October 2008.
Last year record inflows of $17.5 billion had helped the rupee gain 4.7 percent on year.
Dealers would be watching the dollar’s moves versus major currencies for direction. The index of the dollar against six major currencies was up 0.2%.
The euro edged up against the dollar on Monday after falling following a downgrade in Spain’s credit rating by Fitch Ratings which revived concern about Europe’s debt woes and their impact on the global economy.
One-month offshore non-deliverable forward contracts were quoted at Rs46.63, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at Rs46.6275, with the total traded volume on the two exchanges at about $1.2 billion.
Source : livemint.com