Rupee weakens ahead of U.S. jobs data, Sensex falls

By Swati Bhat

Reuters Market Eye - The rupee weakened on Friday ahead of U.S. jobs data, which could provide clues about when the Federal Reserve will start removing its monetary stimulus, with sentiment also hit as shares continued to retreat from recent record highs.

Hopes for continued foreign flows had helped the rupee climb to a five-week high on Wednesday, although the currency ended the week up just 0.2 percent. Still, that was enough to mark its fourth weekly gain in five.

Eased global monetary policies have helped spark a surge of funds into emerging markets. In India, total inflows into the bond and share markets so far this year stand at $31 billion.

In that context, analysts said the European Central Bank's interest rate cuts and additional asset purchases could help spark more flows, although how long the Fed continues its easy money stance is likely to be far more important.

Still, analysts also warned against overstating the importance of one indicator.

"The non-farm payrolls is important but broadly sentiment continues to remain in favour of the rupee, so any fall in the rupee due to broad dollar gains will be temporary," said Paresh Nayar, head of fixed income and foreign exchange trading at First Rand Bank.

The partially convertible rupee closed weaker at 60.39/40 versus Thursday's close of 60.3550/3650.

Traders broadly expect the rupee to remain in a range of 60 to 61 next week.

Losses in the domestic sharemarket also hurt sentiment for the local unit. Shares fell for a second straight session as profit-taking continued in blue-chips after a string of records earlier this week. .BO

Some concerns were also raised after overseas investors sold index futures worth 5.91 billion rupees ($97.9 million) and stock futures worth 6.77 billion rupees on Thursday, according to exchange data.

In the offshore non-deliverable forwards PNDF, the one-month contract was at 60.68 while the three-month was at 61.28.

((Editing by Anupama Dwivedi))