Mumbai: The rupee snapped a three-day rally to post its biggest single session fall in nearly three weeks on Tuesday as dollar demand outstripped supply and domestic equities turned choppy.
The euro’s retreat from its intraday high on caution before a key vote on proposed changes to the euro zone’s rescue fund also weighed on the rupee, traders said.
[caption id=“attachment_105210” align=“alignleft” width=“380” caption=“The euro’s retreat from its intraday high on caution before a key vote on proposed changes to the euro zone’s rescue fund also weighed on the rupee, traders said. Reuters”]  [/caption]
The partially convertible rupee ended at 49.335/345 per dollar, 0.7 percent down from its previous close, making it the largest single session drop since Sept 22, when the unit had dipped 2.5 per cent.
The unit moved in wide band of 48.86 to 49.39 during trade. “Inflows dried up as usually is the case after a holiday in the United States, while outflows increased due to demand, making it a largely one-sided market,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.
Traders said demand for the greenback came from domestic oil companies, corporates and possibly for defence related payments. Oil is India’s largest import item and oil refiners are the biggest buyers of dollars in the local market.“Rupee’s move on Wednesday will depend upon overnight developments in the euro zone and US markets,” Raina added.
The local currency had gained in opening trades, supported by a rise in the euro and domestic equities. However, Indian shares erased early gains of more than 1 per cent and snapped a two-day rise to end 0.1 percent lower.
“Early on, people had gone short on the dollar expecting the rise (in rupee) to continue, but towards afternoon the demand just surged ahead negating supply and caught some on the wrong foot, prompting a trimming of the short positions,” said a dealer with a state-owned bank.
The euro dipped on caution over a Slovak vote on changes to the euro zone’s rescue fund, but it held in positive territory for the week after hopes for a solution to the debt crisis sparked a squeeze of short positions in the currency.
Slovakia is the only one of the euro zone’s 17 members that has yet to ratify changes to the 440-billion-euro European Financial Stability Facility.
The euro was at $1.3611 at end of rupee trade, higher than $1.3592 on Monday but weaker than its intraday high.
The index of the dollar against six major currencies was at 77.739 points versus 77.808 points on Monday.
PTI