Rupee dips as dollar up vs majors, lower shares

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The rupee weakened towards more than two-month lows on Tuesday as the dollar continued to gain versus the euro and lower domestic shares fueled concerns of foreign fund withdrawals.At 10:05 a.m. (0435 GMT), the partially convertible rupee was at 45.65/66 per dollar, after dropping to 45.6950. It had closed at 45.62/63 on Monday after falling to 45.77 during trade, its weakest since March 5."Thought we will see some selling resuming today, but markets are stuck now. We should see a range of 45.55-45.75 unless the euro tanks again," said Vikas Chittiprolu, a senior foreign exchange trader with state-run Andhra Bank.The index of the dollar against six major currencies was up 0.3 percent. However, most Asian currencies were stronger compared to the dollar, helping limit the rupee's drop.The euro dipped on Tuesday, its trend seen weak despite a rebound from a four-year trough, due to persistent investor jitters over the euro zone's fiscal woes and concerns that austerity steps could hurt the region's growth."The rupee has had a more or less flattish open and action so far but expected to remain biddish till the fixing as there is some squaring off of non-deliverable forward positions," said Madhusudan Somani, head of foreign exchange dealing at Yes Bank.One-month offshore non-deliverable forward contracts were quoted at 45.72, weaker than the onshore spot rate.Indian shares fell 0.3 percent early, with financials leading the decline, amid mixed Asian markets.The benchmark has dropped over 4 percent so far this month, with foreign funds pulling out around $665 million from Indian equities. Still, they have invested a net of about $5.9 billion so far in 2010, adding to a record $17.5 billion last year.The rupee's fortunes are closely linked to these flows and the unit is down about 2.8 percent so far this month, trimming its gains in 2010 to just around 2 percent.In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were at 45.6650 and 45.6625 respectively, with the total traded volume on the two exchanges at about $1.3 billion.(Reporting by Swati Bhat; Editing by Ranjit Gangadharan)(For more business news on Reuters Money visit http://www.reutersmoney.in)
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