Rupee posts biggest weekly loss in 14 years

The rupee posted its biggest weekly loss since July 1996 as shares extended losses over concerns about the Eurozone crisis. It went down 3.6% as foreign institutional investors (FIIs) sold stocks after the crisis intensified.

The currency closed at 46.92 per dollar compared to 46.80 on Thursday. It also touched an intraday low of 47.33 — the lowest in six months.

“The demand for dollar has increased as FIIs are pulling out from Indian stocks,” said K Ramanathan, chief investment officer, ING Investment Manager. “The rupee weakened against the dollar on the back of major dollar buying by big corporates and foreign banks,” said a forex dealer with a large public sector bank.

Indian stock markets ended in red on Friday. After regaining almost three-fourths of losses throughout the day, the BSE Sensex lost 74 points to end at 16,445.61 while the NSE Nifty was down 16 points to settle at 4,931.15.

Inflows related to the 3G spectrum auction and speculation that
the FII limit on gilts will be increased helped the rupee recover on Thursday. The scenario may change as the German parliament has approved a $930 billion aid to debt-ridden European countries.    

As a result, dealers are optimistic about the recovery of the euro, which may in turn boost the rupee.

“Next week, the rupee is expected to appreciate against the dollar as there will be inflows. The Standard Chartered IDR issue next week will also help inflows,” said Amogh Moghe, forex dealer-cum-consultant at Mecklai & Mecklai. The rupee is expected to trade in the 47.30/35-46.30/35 band next week, he said.

Meanwhile, the Reserve Bank of India’s deputy governor KC Chakrabarty said: “If in normal times it (volatility) happens, then it is a concern. But, because of a crisis if it is happening, then it (rupee) will adjust to itself and (there is) no problem.”

With agency inputs