The Indian rupee weakened on Monday, tracking weaker offshore rates, as sustained foreign selling in equities continued to raise concerns about the gaping current account deficit (CAD).
The rupee resumed lower at 63.65 per dollar as against the last weekend's level of 63.20 at the Interbank Foreign Exchange (Forex) Market and dropped further to 64.20 at 1040 hours, showing a fall of 100 paise or 1.58 per cent compared to 63.20/21 on Friday. The unit has moved in a range of 63.65 to 64.26 so far during the day. It fell to a record low of 65.56 last week, and has lost more than 14 per cent so far this year.
New York's main contract, West Texas Intermediate for delivery in October, rose 36 cents to USD 106.78 in mid-morning trade.
In the global market, the US dollar swung between small gains and losses against major currencies after Federal Reserve officials wrapped up a yearly gathering, appearing ready to start slowing monetary stimulus next month.
Finance Minister P Chidambaram met foreign investors on Saturday to seek suggestions on attracting dollar inflows, according to local media reports.
The reports quoted Secretary for Department of Financial Services Rajeev Takru as saying the government could announce some measures in 8-10 days.
India urgently needs to attract capital as foreign institutional investors (FIIs) have sold about $4.2 billion in bonds this year. Adding to concerns, overseas funds are also shedding some of their stock positions, having sold about $750 million in equities over the previous six sessions.
Still, traders remained sceptical about whether India can attract foreign capital to help narrow a record high current account deficit despite the surge in debt yields, as growth is stuck at a decade low while an expected wind down in U.S. monetary stimulus is expected to hit emerging markets.
"FII debt investors in India will come back only if there is currency stability but not because of a little higher interest rate," said Samir Lodha, managing director at QuartArt Market Solutions.
Monday's fall tracked the one-month offshore non-deliverable forward rate, which was being quoted at 64.92 per dollar, compared to the onshore one-month forward rate of 64.75.
Traders also said importer demand for dollars was pressuring the rupee although they expected that to wane through the session, allowing some recovery in the domestic currency.