Mumbai: The rupee fell 1.12% against the dollar from the Friday’s close in intraday trade on Monday as the greenback strengthened against global currencies on Spain’s borrowing woes.
The rupee was trading at 55.95 a dollar at 2.53 pm, against Friday’s close of 55.32. The dollar gained against the euro, which fell to a two-year low of $1.21 after two of Spain’s indebted regions sought financial aid from the central government.
The Indian currency had strengthened to 55.91 a dollar earlier. A dealer said this may have been on account of intervention by the Reserve Bank of India. The central bank does not protect any particular exchange rate level but sells dollars in the market to smoothen out volatility.
The contagion effect of the euro crisis is spreading to Spain, as reflected in its borrowing cost. The yield on the 10-year Spanish bond recently touched 7%, a record high, as investors were doubtful about a full recovery in the euro region. Europe’s fourth-largest economy could be following the path of Greece, Portugal and Ireland that remained just shy of asking for a complete bailout of their economy.
The continued turbulence in the euro zone will continue to strengthen the dollar as investors rush to safe-haven assets in time of distress. This will impact the domestic currency as well. The rupee touched an all-time low of 57.30 to the dollar in intraday trade on 22 June.
