Rupee drops for second day; weak shares hurt

Home » WORLD » Asia/Pacific » Rupee drops for second day; weak shares hurt

By Zimbabwe Investor on September 23, 2013. No Comments

The rupee’s rally following the Fed’s decision to refrain from tapering its massive asset purchase programme on Wednesday was short-lived as the RBI chief Raghuram Rajan put inflation management back at the forefront and chose to raise key policy rates on Friday.

The local currency, which had dropped over 20 percent to hit a record low of 68.85 on August 28, has recovered more than 8 percent since Rajan joined office on September 4 and announced a slew of measures.

“The rupee is likely to again trade with a weakening bias for the rest of the week as Fed tapering fears are again haunting the market. They had to come at some point, but its come a bit early after yesterday’s Bullard’s comments,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

“I think the rupee will hold in a 62-64 range this week and in a broad 62-65 range in the near term,” he added.

The U.S. Federal Reserve could still scale back its massive bond buying programme at an October meeting should data point to a stronger economy, St. Louis Fed President James Bullard said on Friday.

The partially convertible rupee closed at 62.60/61 per dollar compared with 62.23/24 on Friday. The unit moved in a range of 62.34 to 62.73 during the session.

The Nifty fell over 2 percent, marking its second consecutive session of decline, on continued selling in rate-sensitive shares especially banks such as State Bank of India after a surprise rate hike by the central bank.

Traders will continue to monitor any further steps by the central bank or the government for near-term direction.

In the offshore non-deliverable forwards, the one-month contract was at 63.39 while the three-month was at 64.52.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 62.66 with a total traded volume of $2.22 billion.