Rupee Weakens For 11th Straight Week As Investors Dump Risky Assets

The Indian rupee hit a record low on Friday and weakened for a 11th straight week as foreign investors continued to dump riskier assets amid rising concerns around a global recession with investors now awaiting the Fed meeting outcome on July 27.

The partially convertible rupee ended trading at 79.8775 to the dollar just a shade weaker than Thursday's close of 79.8750. Earlier it hit 79.96, touching an all-time low for the fifth consecutive session.

The rupee has now dropped for 14 of the last 15 weeks.

"We are just shy of 80 to the dollar which was a level people expected to be hit only by end of year. We could see a further fall in the rupee unless there is a reversal of foreign fund flows," a senior trader at a private bank said.

Emerging market currencies were on pace for their sixth consecutive week of losses as worries over a potential global economic downturn as well as faster U.S. interest rate hikes dented the appeal for riskier assets.

Indian shares ended up 0.7 per cent, but foreign investors have been dumping domestic assets with year to date net sales having exceeded $30 billion. 

Analysts, however, are predicting a change of course in foreign flows, with stock market valuations looking fairly attractive after recent falls, but the US Federal Reserve's policy outcome on July 27 will be a key.

Rising interest rate differentials with the United States could prompt more risk aversion and further hurt the rupee.

Traders ramped up bets that the Fed would go for a super-sized tightening at its July 26-27 meeting, after data on Wednesday showed consumer price inflation racing at the fastest pace in four decades.

But bets were pared after Fed Governor Christopher Waller and St. Louis Fed President James Bullard said they favored another 75 bps hike this month.

India's benchmark 10-year bond yield, however, continued to rise and closed trading up 5 basis points on day at 7.43 per cent.

On the week, the 10-year yield rose 2 basis points, snapping three weeks of falls.