Mumbai: The rupee posted its biggest one-day drop in five-and-a-half months on Monday, bogged down by a sharp sell-off in local shares and hefty gains in the dollar versus higher-yielding currencies.
The partially convertible rupee fell to an intraday low of Rs49.01 per dollar before closing at Rs48.955/965 per dollar, its lowest close since 13 July and 1.5% weaker than its Friday’s close of Rs48.24/25.
This is the unit’s biggest one-day loss since 2 March, a day before it hit an all-time low of Rs52.2.
“Everything seemed to be collapsing today, the stock market fall, euro and all other currencies coming off... but to some extent this was expected after the rally we saw,” said P.V. Shreedharan, chief currency trader at Development Credit Bank.
“Overall the situation has not fully improved and the uncertainty about the monsoon is also there. We could possibly see levels higher than 49 and it could also possibly test 50 in about two months time or even before,” he added.
Shares dropped 4.1% in their biggest fall since the budget in early July, as worries about the pace of global economic recovery sparked a broad sell-of in equity markets across the world.
The euro hit a two-week low against the dollar and the yen on Monday after weak global shares and oil prices ruined traders’ appetite for risk and battered currencies seen to be high-risk.
The dollar index, a gauge of the US unit’s performance versus six majors, was up 0.7%.
Dealers said state-run banks were seen selling dollars sporadically. The central bank usually buys or sells dollars via state-run banks to smoothen volatility in the currency market.
“There was all round (dollar) buying today, think there was decent foreign fund outflow. Oil buying in the morning and sharply lower global equities weighed,” said Madhusudan Somani, head of foreign exchange trading, at Yes Bank.
Dealers said there was some dollar demand from banks looking to arbitrage in the non-deliverable forward segment.
One-month offshore non-deliverable forward contracts were quoted at Rs49.06/16, weaker than the onshore spot rate.
“The uptick in the dollar/rupee looks likely to continue, things are looking bad so we may open higher with gap tomorrow,” Yes Bank’s Somani said.
In the currency futures market, the most traded near-month contract on the National Stock Exchange and MCX-SX closed at 48.9925 and 48.9975, respectively, with the total traded volume on the two exchanges at about $2.2 billion.