September 29, 2011 / 3:07 AM / 8 years ago

Rupee weakens as euro zone concerns resurface

MUMBAI (Reuters) - The rupee weakened on Thursday as concerns over the euro zone’s debt resurfaced, prompting a sell-off in riskier assets like equities, with the local unit looking set to post its biggest quarterly loss in at least three years.

An employee counts rupee notes at a cash counter inside a bank in Agartala December 31, 2010. REUTERS/Jayanta Dey/Files

International auditors return to Athens on Thursday to deliver a verdict on whether Greece’s tougher austerity measures qualify for aid to avert a default that would plunge the country into bankruptcy.

By 10:30 a.m. (0500 GMT), the partially convertible rupee was at 48.91/92 per dollar, 0.3 percent weaker than its close of 48.75/76 on Wednesday. Forex and debt markets will be closed on Friday for half-yearly closing of bank accounts.

The rupee has shed more than 9 percent so far in the quarter, and is set to post its biggest quarterly loss since the September quarter of 2008.

“The rupee opened weaker due to higher non-deliverable forwards and tracking a stronger dollar,” said Vikas Chittiprolu, a senior foreign exchange dealer with Andhra Bank, predicting a range of 48.80-49.15 for the session.

The one-month offshore non-deliverable forwards (NDF) stood at 49.12, much below the onshore spot rate, suggesting a bearish near-term outlook for the rupee.

“After a brief respite...NDFs are increasing implied depreciation again. This shows market concern over medium-term outlook,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB wrote in a note on Wednesday.

The one-month onshore forward premium was at 22 points, steady from Wednesday, while the three-month was at 64 points from 65 points and the one-year at 131.5 points from 133.25.

The euro was under modest pressure in Asia on profit taking and squaring of positions following a three-day rally.

Traders said outcome of Germany’s Bundestag (lower house) vote on Thursday on widening the scope of the European Financial Stability Facility bailout fund would be keenly awaited.

“There are some corporate flows seen in the market as well, which is helping the rupee but no specific names heard so far,” a senior dealer with a private bank said.

On Wednesday, likely residual flows from Reliance Industries’ $7.2 billion stake sale to BP approved in late July or possible inflows on account of a stake sale by Reliance Capital in its insurance arm to Japan’s Nippon Life Insurance had helped push the rupee to a one-week high of 48.65.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all at 49.1150. The total traded volume on the three exchanges was $1.3 billion.

Reporting by Swati Bhat; Editing by Aradhana Aravindan

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