Rupee drops past 45/$ as shares slide
The rupee fell to its lowest in nearly six weeks on Monday after an equities selloff following a US rating downgrade ignited concerns about foreign fund outflows.
August 08, 2011 / 14:34 IST
The rupee fell to its lowest in nearly six weeks on Monday after an equities selloff following a US rating downgrade ignited concerns about foreign fund outflows.
Efforts by the central bank to calm markets before trading began failed to bolster investor confidence that was already shaken by a gloomy world economy.Federal bond yields dropped to their lowest in seven-weeks as investors dumped risky assets and moved to safe-haven government securities. At 11:55 am (0625 GMT), the partially convertible rupee was at 44.96/44.97, 0.5% weaker than Friday's close of 44.735/740. It hit 45.0650 in early trade, a level not seen since June 28."Such weakness is almost certainly following the turmoil in equity markets. We now have to see how the dollar demand from oil companies shapes up," said a senior foreign exchange dealer at a private sector bank."If oil demand is heavy, then comfort from exporter selling will be offset."State-run banks have been buying dollars since last week for domestic oil refiners to clear import dues estimated at around USD 5 billion to Iran.The Reserve Bank of India, which controls the country's foreign exchange reserves of more than USD 300 billion, said it would ensure adequate rupee and forex liquidity. Traders said the statement failed to soothe investors and forecast the rupee could weaken to as much as 45.10 during the day.Gains in the euro was helping limit the rupee's weakness, traders said.The euro climbed to USD 1.4349 after the European Central Bank announced steps to ease tensions in the euro zone debt market, while the Group of Seven major industrial nations reaffirmed their vow to support financial market stability and growth. To convert USD to INR, click here http://www.moneycontrol.com/mccode/currencies/ For gold prices in India, click here http://www.moneycontrol.com/commodity/ Get the latest gold prices here http://www.moneycontrol.com/commodity/It was at USD 1.4170 when the rupee closed on Friday, while the index of the dollar against six major currencies was down at 74.181 points from 74.953.India's main 30-share index shed more than 3% tracking a selloff in Asian peers after Standard & Poor's downgraded the US sovereign debt rating and on fears that the world's largest economy may be sliding back into recession.The one-year onshore forward premium fell to 184 points from 191.75 points on Friday, dropping for a third straight session, an indication the rupee could weaken further, traders said.The one-month onshore forward premium was at 20.75 points from 20.25 points, while the three-month was steady at 59.25 points.One-month offshore non-deliverable forward contracts were quoted at 45.22, weaker than the onshore spot rate.In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all at 45.10. The total volume was at USD 6.37 billion. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
