Rupee slides to 3-month low on renewed outflow concerns

MUMBAI: The rupee slid to almost three-month lows as it fell for the sixth straight day amid rising outflows from Indian debt securities and the prospect of the flight intensifying with the US Federal Reserve hinting at an interest rate hike in June.

The local unit weakened about 38 paisa, or 0.57%, to close at 67.37 a dollar on Thursday. It breached the psychological mark of 67 on Thursday after a spell of lackluster trading sessions lasting almost three months. During the period, the rupee remained range-bound with little volatility.

"The domestic currency market has turned volatile almost after two months," said Keta Kurkute, VP, forex risk advisory, at Mecklai Financial, a consultancy. "Globally, investors are expecting rate hike in the US, especially after the hawkish FOMC minutes were released on Wednesday."

"Some foreign banks are seen shoring up dollars in the domestic market as the greenback rallies across the board," she added.

Though the Reserve Bank of India mostly stayed away from intervening in the forex market to prevent sharp swings in the rupee, some large foreign banks were buying dollars as the greenback was strengthening against most emerging market currencies.

Sudden volatility in the currency market has, however, triggered some arbitrage opportunity between the offshore market (non-deliverable forwards) and domestic market.

A rate hike in the US is likely to see a flight of capital from emerging markets, including India, as overseas investors may move to the safety of safe-haven assets.

According to BSE provisional data, foreign portfolio investors ( FPIs) have net sold stocks worth Rs 764.58 crore on Thursday.