Mumbai: The Indian rupee crashed 1.5% in its biggest one-day loss this fiscal against the US dollar as foreign funds continued to pull out from equities following the global turmoil caused by the US subprime crisis.
The rupee went on a downward spiral to a nearly four month low of 41.36/37 against the greenback, cheaper by 61.50 paise from Tuesday’s close of 40.745/40.755. In percentage terms, this is the steepest fall since March 29, 2007 and the second biggest in more than 11 years since March 1996.
In active trade at the Interbank Foreign Exchange (forex) market, which opened today after the August 15 Independence Day holiday, the local currency resumed sharply lower at 41.02/04 a dollar. It later moved further down to the day’s low of 41.3750 due to heavy dollar buying.
The subprime crisis and the resulting risk aversion worldwide weighed on the rupee sentiment, forex dealers said, adding that “the rupee dropped sharply in concluding one hour of trading on heavy dollar purchases by banks”.
The rupee had risen by 10% this year following consistent capital inflows into equity markets and RBI’s reluctance to intervene in forex market. It is still around 12% above its lowest level since August 2006.
The benchmark Sensex today tumbled by 642 points or 4.28%, triggered by worldwide stocks meltdown. Foreign Institutional Investors (FIIs) have sold shares worth a net Rs 2,500 crore so far this month as they seek to limit exposure to riskier assets and look for safer havens.
The Japanese Yen, however, soared to a five-month high against the dollar and the Euro as investors who had borrowed the low-interest rate currency to buy riskier but higher yielding assets unwound their positions.