Indian Rupee Weighed Down By A Strong Dollar

The Indian rupee slipped lower at commencement on Wednesday, 24 December 2014 on the back of a strong dollar overseas. Besides, data showing the fastest U.S. economic growth in more than a decade bolstered the case for the Federal Reserve to raise interest rates, weighing down rupee alongside regional currencies. Moreover, increased demand for the American unit from importers and a lower opening in the domestic equity market kept pressure on the rupee. The domestic currency opened weaker by 15 paise at Rs 63.44 against the US dollar and edged up to a high of 63.38 before falling back to a low of 63.49 so far during the day. In the spot currency market, the Indian unit was last seen trading at 63.45, down 16 paise or 0.25% as compared to previous close at 63.29.

Rupee weakened on Tuesday on the back of month-end dollar demand from importers and a fall in domestic shares, but bonds gained, tracking a fall in global crude oil prices in a session marked by low trading volumes. Movement in foreign fund flows is likely to be a key determinant of market direction in the near-term as most foreign funds stay light on investments towards the end of the year.

Volatility ruled the roost as key benchmark indices sharply pared early gains and turned negative in morning trade. Asian stocks were trading higher after US equities climbed to all-time highs as the world`s biggest economy grew at the fastest pace in 11 years.

Meanwhile, foreign portfolio investors (FPIs) sold Indian shares worth a net Rs 444.93 crore yesterday, 23 December 2014, as per provisional data. At the time of writing, the S&P BSE Sensex was down 8.90 points or 0.03% at 27,497.56 while the CNX Nifty was down 3.15 points or 0.04% at 8,263.85.

In the global currency market, the dollar hovered at its highest in nearly nine years against a basket of major currencies after stunningly strong US economic growth spurred markets to bring forward the timing of a likely hike in interest rates. The dollar index is trading above key 90 level for the first time since March 2006 after strong U.S. and U.K. economic data.
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