Rupee slid 1.3% on portfolio outflows

In the wake of the sharp fall in stock prices, the rupee on Friday posted its biggest weekly loss in three months, closing at 44.74 against the dollar, from 44.55 yesterday, according to Bloomberg data. The fall has been 1.3 per cent in a week over the close of 44.18 last Friday.

The risk aversion emanating from US economic data has led to a very weak domestic stock market and increasing worries about capital inflows, said foreign currency dealers and analysts. Foreign institutional investors sold Indian shares worth Rs 1,789 crore on Friday, provisional data showed.

India Forex Advisors, a consultancy outfit, said there was rising concern that the global economy was slipping back into recession, prompting investors to cut their positions in risky assets.

T S Srinivasan, general manager, treasury, Indian Overseas Bank, said: “Investors are now tracking the euro. Uncertainty in the euro zone has led to more demand for dollars, leading to rupee devaluation.”

The depreciation has led to a decline in premiums. The one-year forward premium, at 210 paise as the week began, is currently 187p.

Meanwhile, the country’s foreign exchange reserves rose by $2.3 billion to $319.1 bn in the week ended July 29, according to Reserve Bank of India data. The fluctuation in value of international currencies and portfolio inflows and revision in value of gold with the RBI led to the rise.

Currency assets rose $1.63 bn in the week to $286 bn. That of gold reserves rose by $681 mn to $25.3 bn.