Rupee weakens as recovery jitters boost dollar

The rupee weakened for the first time in three days as concern the global economic recovery will stall prompted investors to favour the perceived safety of the dollar over emerging-market assets.

The rupee fell 0.6% to 46.485 per dollar at the close of trade on Tuesday. It reached a one-week low of 46.61 on June 25.

Currencies and benchmark stock indexes fell across most of Asia’s developing economies after a gauge that tracks the greenback’s strength climbed by the most in three weeks.

Japan’s factory output and household spending slipped in May and the unemployment rate unexpectedly increased, government reports showed on Tuesday. The New York-based Conference Board corrected its April measure for the outlook of China’s economy, revising downward the index of key indicators.

“The rupee’s tracking the weakness in stocks and the dollar’s rebound because the latest economic reports from Asia aren’t particularly encouraging,” said Krishnamurthy Harihar, Mumbai-based treasurer at the Indian unit of South Africa’s FirstRand.

“In the medium term, we should see the rupee gradually appreciating, driven by fundamentals.” Harihar forecast the currency to trade between 46.25 and 46.75 this week.

Offshore forwards indicated the Indian currency will trade at 47 to the dollar in three months, compared with expectations of 46.69 on Monday. The dollar index, which tracks the greenback against the currencies of six major US trading partners, rose 0.6%, the most since June 4, extending Monday’s 0.4% advance.