Indian rupee falls for third day, but US Federal Reserve taper effect minimal as CAD fears recede

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Losses were minimal as Indian rupee is seen less vulnerable on a sharply lower CAD. Reuters Losses were minimal as Indian rupee is seen less vulnerable on a sharply lower CAD. Reuters
SummaryThe Indian rupee fell for a third session on Thursday, in line with emerging market currencies.

The Indian rupee fell for a third session on Thursday, in line with emerging market currencies as the US Federal Reserve began its long-awaited tapering, but losses were minimal as the currency is seen less vulnerable on a sharply lower current account deficit (CAD).

India, which along with Indonesia had to bear the brunt of the summer selloff in emerging market currencies, is considered much better prepared this time because of the sharp rise in reserves, primarily due to $34 billion inflows via two concessional swap facilities opened by the central bank. Dealers cited some US dollar selling by state-run banks in the session, which some said may be on behalf of the central bank.

The partially convertible Indian rupee closed at 62.14/15 per dollar compared with Wednesday's close of 62.09/10. It fell to a two-week low of 62.48 in the session.

In the offshore non-deliverable forwards, the one-month contract was at 62.61, while the three-month was at 63.42.

HIGHLIGHTS

* Rupee ends at 62.14/15 per dollar vs 62.09/10 on Wed

* Fed says to reduce bond purchases by $10 bln/month

* Some state-run banks seen selling dollars, sparking talk of RBI

FACTORS TO WATCH

* Dollar pares gains after Fed sweetens taper message

* Rupiah hits 5-year trough after Fed trims stimulus

* European shares rally as Fed sugar-coats taper move

* Foreign institutional investor flows

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