Rupee extends drop on Korean tensions

Rupee extends drop on Korean tensions

Mumbai: Rupee extended its fall to fresh two-month lows on Tuesday afternoon, tracking the dollar’s gain versus majors following exchange of artillery fire on the Korean peninsula.

North Korea on Tuesday fired dozens of artillery shells at a South Korean island, setting buildings on fire and prompting a return of fire by the South, Seoul’s military and media reports said.

At 1:28pm, the partially convertible rupee was at 45.63/64 per dollar, after touching 5.6750, its lowest since 23 September and below 45.405/415 at close on Monday.

Shares fell more than 3% in afternoon trade in what traders called a knee-jerk reaction to North Korea firing dozens of artillery shells at a South Korean island.

The dollar index which tracks the greenback’s performance against a basket of major currencies, was up 0.4%.

The US dollar rose broadly after North Korea fired artillery at a South Korean island, sending investors in search of safety and putting geopolitical risk alongside Europe’s debt crisis as reasons to play it safe to the year end.

One-month offshore non-deliverable forward contracts PNDF were quoted at 45.96, weaker than the onshore spot rate, suggesting a bearish near-term outlook.

In the currency futures market INRFUTURES, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange were all at 45.66, with the total traded volume on the three exchanges at $4.2 billion.