Rupee falls for second day; seen rangebound in near-term

By Swati Bhat

MUMBAI (Reuters) - The rupee weakened for a second day on Tuesday as good demand for the greenback from importers and weakness in domestic shares through a large part of the day, as also in other Asian currencies, hurt sentiment.

The BSE Sensex and Nifty ended flat on Tuesday after hitting record highs for the third consecutive session as gains in defensive stocks such as healthcare and technology were offset by profit-taking in the broader market.

Traders will continue to monitor foreign fund flows into the debt and equity markets for near-term direction.

Foreign investors bought a net $826.9 million in debt markets on Friday, the highest single-day flows since Jan. 15, taking total inflows in 2014 to $9.43 billion. Total year-to-date flows in equities stand at $9.13 billion.

Investors are also concerned about debt flows going ahead as foreign investors have nearly exhausted their available investment limit in government debt. Overseas investors used up 92.82 percent of the available debt limit, following which the National Stock Exchange said it will conduct an auction for 71.52 billion rupees ($1.21 billion) on Wednesday to allot the remaining unutilised limit.

"The rupee weakened today partly due to weakness in shares and the euro. But I don't see much further weakness in the near-term. I think 59.60 should hold in the near-term," said Uday Bhatt, a foreign exchange dealer with UCO Bank.

Dealers expect the rupee to remain in a broad 58.80 to 59.40 range over this week.

The partially convertible rupee closed at 59.29/30 per dollar compared with its close of 59.20/21 on Monday.

The dollar held steady versus a basket of major currencies on Tuesday, clinging to gains made the previous day thanks to higher U.S. bond yields after last week's solid U.S. jobs report.

The consumer price inflation data due on Thursday will be watched, though a large impact on the foreign exchange market is unlikely, dealers said.

In the offshore non-deliverable forwards, the one-month contract was at 59.52 while the three-month was at 59.56.

(Editing by Anupama Dwivedi)