The Hindu Business Line : Rupee falls on fears over PNs

The rupee ended lower due to fears that the ban on participatory notes may slowdown the flow of foreign funds into India. The rupee opened at 39.90/92 and closed at 39.88/89, about 15 paise lower from Friday's close of 39.73/74. There was dollar selling in the initial part of trade, as there were good inflows.

But at the end of the day there was lot of dollar buying by custodial banks, on fears that there could be a sell-off by FIIs, said a forex dealer. The rupee could depreciate beyond 40 if the stock market continues to be under pressure, he added. The dollar gained 100 points against all other overseas currencies, except the yen, because of unwinding in the yen carry trade.

Carry trade is when an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. The forward premia ended lower with the six-month closing at 0.6 per cent (0.9 per cent) and the 12-month closing at 0.67 per cent (0.86 per cent). - Our Bureau

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