Rupee drops further on import payments

The rupee fell on Wednesday, pressured by payments for oil importers and as traders squared off positions before the end of the financial year this week.

Subdued stocks also clouded the outlook for capital inflows and weighed on the rupee, traders said.

"The market seems to be bidding for the dollar," said a foreign currency trader with a private bank. "It is the year-end for spot trades, so people who have exposures will need square them."

As spot trades are settled on transaction plus two days, deals on Wednesday would be settled on Friday, the last session for the financial year.

"It will be a volatile day," the currency trader said, forecasting a range of 50.70 to 51.10.

At 10:23 am, the rupee was at 51.01 to the dollar, 0.5% weaker than Tuesday's close of 50.735/745.

The rupee will see support at 51.05, the 50% retracement of the Monday to Tuesday gain, with stronger support at 51.15, marking Tuesday's low.

India's main share index was down 0.6%, and the weakness dented outlook on foreign capital flows hurting the rupee, traders said.

The one-month offshore non-deliverable forward contracts were at 51.56.

In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange were all around 51.00, on a total volume of $1.56 billion.