Mumbai: The rupee tumbled past the 61 to the dollar level on Monday on the back of fears that the US Federal Reserve would wind down economic stimulus spending sooner than expected and weak sentiment in the domestic market sent
The rupee, which tested a new lifetime low of 61.21 against the dollar in the morning, briefly recovered towards noon but weakened again to trade below the 61 level. At 3.10 pm, the local unit was trading at 61.01, or down 1.26% from the Friday close.
In June, foreign institutional investors (FIIs) sold Indian equities worth about $1.76 billion. So far this year, the rupee has lost 9.94%.
Dealers attributed the slump to the significant strengthening of the dollar globally and weak domestic sentiment. In addition, an improvement in the US job data also triggered speculation that the US Federal Reserve could exit from its monetary stimulus sooner than expected, experts said.
Earlier, the partially convertible rupee opened at 60.945 against the dollar.
“The major reason for the rupee’s weakening is the strengthening of dollar,” said Naveen Raghuvanshi, a dealer at Development Credit Bank Ltd. “Also, confidence among investors about any significant improvement in the economic recovery remains low.”
The dollar index, which measures the US currency’s strength against major currencies, gained 0.12% to 84.554 points. This is its highest level since July 2010, according to Bloomberg.
As a reaction, the Sensex, India’s major benchmark equity index, fell 1.34% to 19,235.02 points.
According to Moses Harding, head of asset liability committee at Indusind Bank Ltd, the rupee’s weakening may persist. “(Rupee is) looking bad for 61.50-62,” Harding said.
Bond yields also jumped on fears that foreign investors would continue to sell rupee debt. The 10-year yield rose as much as 13 basis points to 7.63% from its previous close.
