Mumbai: The rupee slumped to a two-month low on Tuesday after the stock market fell 11.5% in opening deals, aggravating fears foreign investors were withdrawing their funds, dealers said.
At 10:15 am, the partially convertible rupee was at 39.72/73 per dollar, weaker than the previous finish of 39.555/565. It fell to a low of 39.78 per dollar, its weakest since late November.
“Everyone knew the rupee was going to open weaker, but the real impetus is going to come from the stock market,” said the chief dealer with a public sector bank.
“With stock also opening lower, the pressure on the rupee to fall will be quite strong,” the dealer added.
The fall in local shares at the start of trade triggered an automatic halt of stock trading for one hour.
Sentiment was hit after stocks tumbled across Asia on Tuesday as panic gripped markets that a US recession could derail global growth.
Foreigners sold $1.4 billion worth of Indian shares in the last three days of last week. In 2007, foreign funds bought a record $17.4 billion of stocks, and this was a key driver for the rupee’s rise of more than 12%.
The rupee received support around 39.70 from exporters who sold dollar holdings. The market expects exporters to continue selling dollars as the rupee weakens.