The Hindu Business Line : Rupee tangos with Sensex on roller-coaster ride

Mumbai, Aug. 17 The forex market reflected the volatility of the equity market on Friday with the rupee falling to lows last seen in April this year, said dealers. The rupee closed slightly higher at 41.33/34 against Thursday’s close of 41.36/37.

On Friday, the rupee opened at around 41.60. Moving in tandem with the huge fall in the stock market, the rupee then fell to the day’s low of 41.7150 in the first half of trade. But when the stock market recouped some of its losses, the rupee also moved up to touch 41.20. Later on, it consolidated at 41.33/34, which was the day’s close.

Lot of exporters sold dollars at the levels of 41.50/60, said dealers.

According to Mr Prakash Rao, Head-Forex Trading, Axis Bank, the rupee moved in alignment with the stock market. “Nothing has changed fundamentally for the rupee. People are worried about the sub-prime crisis in the US and that is affecting sentiments here. But the rupee will appreciate the moment the tension abroad eases.”

All currencies like the pound, euro and Australian and New Zealand dollars are weakening against the US dollar. But once the crisis settles down, there could be massive weakening of the US dollar, Mr Rao added.

Most forex dealers said the rupee may continue to be volatile and may trade in the broad range of 40.50-41.70 next week. But it will depend on how the US markets perform on Friday and Monday. As the Mumbai markets would be closed on Monday on account of Parsi New Year, there could be lot of flows on Tuesday, dealers said.

In the forwards market, the six-month premium closed at 1.30 per cent (1.81 per cent) and the one-year at 1.48 per cent (1.87 per cent).