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Business News/ Market / Stock-market-news/  Rupee falls to 6-week low as banks accumulate dollars to buy gold
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Rupee falls to 6-week low as banks accumulate dollars to buy gold

The home currency closed at 64.17, down 0.20% from its previous close of 64.04, after touching a low of 64.21, a level last seen on 16 June

The yield on India’s 10-year benchmark bond closed at 7.832% compared with its Friday’s close of 7.824%. Photo: Pradeep Gaur/MintPremium
The yield on India’s 10-year benchmark bond closed at 7.832% compared with its Friday’s close of 7.824%. Photo: Pradeep Gaur/Mint

Mumbai: The Indian rupee on Monday fell to a six-week low as banks accumulated dollars to buy gold on behalf of their clients, aided by a sharp fall in the local equity index.

The home currency closed at 64.17, down 0.20% from its previous close of 64.04. The local unit opened at 64.06 per dollar and touched a low of 64.21, a level last seen on 16 June.

“There was continuous demand (for dollar) linked to the gold. Lot of investors are queuing up to buy gold from the international market and banks are lapping up dollar to do that," said Paresh Nayar, head of forex and fixed income at First Rand Bank.

On 24 July, gold prices fell to a five-year low and are expected to fall further.

India is one of the world’s largest gold importers, with the country estimated to import 800-1,000 tonnes of gold each year.

Indian stocks declined on Monday, reacting to poor company earnings, a global sell-off across assets and fears of greater scrutiny of investors who choose the participatory note (P-note) route. The benchmark Sensex closed at 27,561.38 points, down 550.93, or 1.96%, while the NSE’s 50-share Nifty ended at 8,361 points, down 160.55, or 1.88%.

The yield on India’s 10-year benchmark bond closed at 7.832% compared with its Friday’s close of 7.824%. Bond yields and prices move in opposite directions.

Since the beginning of this year, the rupee has lost 1.69%, while foreign institutional investors have bought $7.41 billion from local equity and $6.53 billion from bond markets.

According to currency dealers, the recent fall in rupee is nothing to panic about.

“INR should stabilize at current levels and we still do not see reason for panic," said Samir Lodha, managing director at QuantArt Markets Solutions, a currency consultant.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.69, down 0.58% from its previous close of 97.244.

Asian currencies closed mixed. Japanese yen was up 0.48%, Singaporean dollar 0.17%, South Korean won 0.08%, China offshore 0.07%. However, Taiwanese dollar was down 0.31%, Malaysian ringgit 0.27% and Indonesian rupiah 0.12%.

The US Federal Reserve is meeting on Tuesday and Wednesday. The US jobless claims data released on Friday showed that claims plunged by 26,000 to 255,000 in the week ending 18 July, the lowest since November 1973. The data raised concerns on US Fed announcing monetary tightening soon, Reuters reported.

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Published: 27 Jul 2015, 09:39 AM IST
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