Rupee weakens on global recovery concern.

The rupee fell to its lowest level in almost a month on speculation investors will favour safer assets like the dollar.

The rupee retreated 0.6% to 46.9150 per dollar, the lowest level since July 26, at the close of trade on Tuesday.

The rupee weakened before data due late Tuesday from the Chicago-based National Association of Realtors that may show US existing-home sales fell by 12.9% in July. That may prompt global funds, who have bought a net $12.6 billion of Indian equities so far this year, to pare holdings, said Roy Paul, deputy general manager at Federal Bank.

“The fundamentals don’t support risk-taking and that is weakening the rupee,” Paul said.

A Commerce Department update on August 27 is estimated by economists to show the US economy grew at a 1.4% pace in the second quarter, which would be the slowest rate since the recovery began in the middle of last year. A 2.4% pace was calculated last month.

The government is aiming to accelerate India’s growth to 8.5% in the current fiscal ending March 31, from 7.4% in the previous year. RBI, in its annual report on Tuesday, said growth is “expected to be stronger,” which could widen the trade deficit.

Indian exports may weaken in the coming months as the global economic recovery flounders, according to officials. Exports expanded 30% to $68.6 billion in the four months through July, while imports jumped 33% to $112.2 billion in the period.

Offshore forward contracts indicate the rupee will trade at 47.56 to the dollar in three months, compared with expectations for a level of 47.26 on Monday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

Source : economictimes.indiatimes.com