Rupee slips 10 paise to 71.34 against USD

Mumbai, September 19 () The rupee fell 10 percentage points against the US dollar on Thursday, closing at 71.34 as strong domestic asset sales, continued outflow of foreign funds and rising crude oil prices made investors nervous.

Forex traders said investors had also become wary after the US Federal Reserve dampened hopes of further interest rate cuts.

On the interbank foreign exchange market, the local unit opened strong at 71.36, hovering between a high of 71.06 and a low of 71.37. It finally ended at 71.34, a 10 percentage point decline from the previous 71.24.

Since the morning, the rupee has followed the evolution of the price of crude oil. A decline in the overnight oil price led to an appreciation of the rupee. However, escalating tensions in the Middle East have limited rupee gains, said Rahul Gupta, head of monetary research at Emkay Global Financial Services Limited.

Gupta added that the market was disappointed by the Fed's mixed outlook.

In line with market expectations, the Federal Open Market Committee cut interest rates by 25 basis points to a target range of 1.75 to 2.0 percent, but weakened hopes for later interest rate cuts as credit costs were cautiously further reduced.

Brent futures, the global oil benchmark, rose 2.14 percent to $ 64.96 a barrel after Iran warned of a full-scale war when it was targeted after drone strikes on its Saudi Arabian oil infrastructure , which further aggravated the tensions of the Persian Gulf.

Strong sales on domestic stock markets and continuing foreign outflows also weighed on the domestic currency, according to forex traders.

The 30-share share of BSE Sensex closed at 470.41 points or 1.29 percent at 36,093.47. Similarly, the broader NSE Nifty dropped 135.85 points or 1.25 percent to 10,704.80.

Foreign institutional investors (FIIs) released shares valued at net 892.52 billion rupees on Thursday according to preliminary stock market data.

The yield on 10-year government bonds was 6.64 percent. The Financial Benchmark India Private Ltd. (FBIL) set the benchmark rupee/dollar reading at 71.3132 and the rupee/euro at 78.9052. The rupee/pound sterling reference rate was set at 89.0626 and rupee/100 Japanese yen at 65.90. DRR ABM ABM