Rupee weakens on S&P action

The rupee weakened against the dollar, falling in tandem with regional currencies as a slump in the US and Asian stocks damped investor demand for riskier assets.

The currency dropped the most in a week after data from the capital markets regulator showed funds based abroad stepped up sales of Indian equities last week. The rupee also fell after Standard & Poor’s cut the nation’s credit outlook to negative from stable, citing a widening budget deficit. S&P affirmed India’s BBB- credit rating, the lowest investment grade.

“The rupee has weakened on expectations that the stock market will witness further losses,” spurring capital outflows, said Roy Paul, assistant manager of treasury at Federal Bank in Mumbai. “Asian equities are substantially down and so are those in the US.”

 

The rupee slid 0.4 per cent to 49.8675 a dollar at close. The currency, which has lost 2.4 per cent this year, reached 50.0625 on February 18, the weakest since December 3. Eight of Asia’s 10 most-used currencies excluding the yen declined today.

The rupee may trade as low as 50, Paul said. It will end the current quarter at 49, according to the median estimate of 25 strategists and economists surveyed.

Overseas funds sold $378 million more Indian shares than they bought last week, compared with net purchases of $111 million during the previous five days, according to data released by the Sebi.