Re ends weak again on FII pullout fears

MUMBAI: The rupee closed at another recent low of 50.3 against the dollar, even as liquidity in the system rose sharply, with banks parking close to Rs 37,000 crore of surplus funds with the Reserve Bank of India (RBI).

The domestic currency weakened, as fears of foreign funds pulling out further money from the country gained strength in the wake of the Mumbai attack.

This was despite RBI intervening to stem the fall in the rupee. Overnight call rates closed lower, as liquidity was ample in the system. But bond yields traded off the day���s lows, since investors sold bonds to cash in on the fall in yields, even as expectations of a rate cut persisted. Bonds yields nevertheless closed at a three year low.

The rupee closed at 50.30 against the dollar, 0.4% weaker from Friday���s close of 50.09. It had hit a record low of 50.60 on November 20. Dealers said importers were buying dollars in the market, while RBI sold dollars through public sector banks to stem the rupee fall. They added that heavy losses in the share market, after an early rally, also hurt sentiment for the rupee.

The Indian benchmark BSE Sensex fell 2.8%, as deepening economic gloom triggered a wave of selling by foreign funds. Foreign funds have sold a net $13.7 billion worth of Indian shares so far in 2008 after buying a record $17.4 billion last year.

Traders remain bearish about the prospects of the rupee as revealed by the offshore non-deliverable forwards market. These contracts were quoting at 51.04 against the dollar, weaker than the onshore spot rate.

Indian overnight call money rates eased on Monday on low demand for funds as most banks had already met their reserve requirements, dealers said. They closed at 6.15%, lower than 6.9% at close on Friday.