MUMBAI—The Indian rupee fell to a new all-time low against the U.S. dollar Wednesday, with selling exacerbating after it crossed a key psychological level of 60 for one dollar.
The rupee was trading at 60.62 to the dollar by Wednesday afternoon, compared with 59.66 in late Asian trade Tuesday.
News of the rupee falling below 60 sent stocks tumbling. The Bombay Stock Exchange's benchmark S&P BSE Sensex reversed the day's gains to fall 0.4% in the last 30 minutes of trading, to close at 18552.12.
"The wild swing in currency is adding to weakness in markets, which is already seeing selling by foreign investors," said Kishor Ostwal, chairman and managing director of Mumbai-based brokerage CNI Research Ltd. 512018.BY -1.92%
Currency dealers attributed the rupee's decline on Wednesday partly to large demand for dollars from oil companies, who usually pay their import bills at the end of the month. They added that foreign investors have also been selling Indian debt.
The rupee has weakened more than 11% since the beginning of May as global investors have rushed into dollar-denominated assets on expectations that the U.S. Federal Reserve will soon roll back a massive stimulus program that has injected billions of dollars into the global financial system. These expectations have pushed yields on U.S. government bonds higher, making them more attractive to investors.
Foreign institutional investors have yanked $4.8 billion from Indian debt in June, partly to take advantage of U.S. yields. At the same time, investors have been concerned about India's economic slowdown, wide current-account deficit and lack of adequate measures to attract fresh foreign investment.
On Wednesday, the rupee had been gradually inching toward 60 but the selloff intensified in the afternoon, after the currency fell below 60 and traders rushed to stop losses, according to a currency dealer in Mumbai. Now, "62 appears within reach," the dealer added.
