Mumbai, Wednesday 19 November 2008: The rupee closed weaker than 50 per dollar on Wednesday for the first time as it was sideswiped by a falling stock market and demand for dollars to arbitrage a gap to offshore non-deliverable forward rates.

The partially convertible rupee ended at 50.02/03 per dollar, 0.7 per cent weaker than 49.66/67 at Tuesday’s close. It hit a low of 50.03 in late trade, its weakest since Oct 27 when it hit a record low of 50.29.

“I still feel there is very good room for the dollar-rupee to go up to 52,” said V. Kumar, chief dealer with State Bank of Travancore.

One-month offshore non-deliverable forward contracts were quoting at 50.80/95, 1.5 per cent weaker than the onshore spot rate, providing a good arbitrage opportunity.

Dealers said some banks were buying dollars in the onshore market to sell offshore and cash in on the price difference.

“We have closed above 50 for the first time, it is a very bullish close for the dollar-rupee,” a senior dealer with a private bank said.

Losses in the share market also hurt sentiment. The share market fell 1.8 per cent, and has now lost nearly 17 per cent over the past six sessions.

Foreign funds have withdrawn more than $13 billion from Indian shares so far in 2008, after buying a record $17.4 billion last year.

Dealers said the central bank was seen selling dollars via state-run banks to try to halt the rupee’s fall through the day, but said volumes were not large. They estimated the central bank sold about $200 to $250 million. (Agency)