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| Rupee falls to 49.79 mark |
| BS Reporter / Mumbai May 15, 2009, 00:34 IST |
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For the first time in nearly two weeks, the rupee breached the 50-mark against the US dollar on concerns that foreign institutional investors will pare their holdings in the local stock markets, resulting in an outflow of the foreign currency.
According to Bloomberg data, the rupee opened weaker this morning at 49.94 against the US dollar, before hitting an intra-day low. But it gained later to close at 49.79 against the greenback. The rupee had dropped 0.8 per cent yesterday to close at 46.69.
The Indian currency had last traded below 50 on April 29, when it had hit 50.09 against the dollar. The recovery in later trade was on account of sale of dollars by exports, including some information technology players, a dealer said.
The stock market has been jittery as the exit poll results have shown a fractured mandate and have raised fears over the next government lasting its five-year term without the support of the Left parties. A weak government, the market fears, will not be able to push through crucial reforms.
So far this month, foreign institutional investors have been net buyers to the tune of over Rs 5,000 crore in the equity markets.
With the political uncertainty likely to persist for a few days, traders expected the Indian currency to remain volatile.
Implied volatility on one-month dollar-rupee options rose as high as 15 percent today, the highest intraday level since March 6, Bloomberg data show.
Offshore contracts indicate bets the rupee will trade at 50.10 to the dollar in a month, compared with expectations for a rate of 49.87 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.
In the currency futures market, the trends were in line with the spot market. On NSE, one-month contract ended at 49.85 to a dollar as against 49.73 yesterday.
Similarly, on MCX, the one-month contract ended at 49.84 a dollar, compared with 49.74 yesterday.
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