Re weakens as domestic stocks fall

The rupee touched a three-week low on Friday against the dollar, due to uncertainty over the US “fiscal cliff” resolution. This resulted in lack of demand for riskier assets like equities. The fall in domestic equities resulted in the rupee closing at 55.07, compared with its previous close of 54.85.

“Domestic stocks fell today and there was also month-end dollar demand, which resulted in weakening of the rupee,” said Akhil Thomas, assistant manager (forex), Federal Bank. The rupee had opened at 55.03 against the greenback and during the day it traded in the range of 54.98 to 55.23. The level of 55.23 a dollar is its weakest since November 29.

Shares ended lower, marking a second week of fall, as lenders were hit by profit-taking. The BSE Sensex ended at 19242.00 on Friday against the previous close of 19453.92. While the NSE NIFTY closed at 5847.70 compared with Thursday’s close of 5916.40. Oil firms bought the greenback aggressively this week while gold importers purchased the US unit to take advantage of relatively lower global gold prices.

“The rupee has been choppy and I expect it to remain so in the last week as well. The US fiscal agreement will be important for the market,” said Paresh Nayar, head of fixed income and forex trading at First Rand Bank. The rupee is set to weaken further against the dollar next week. “It may touch 55.50 levels also driven by month-end dollar demand,” said a currency dealer with a large state-run bank.