The Indian rupee hit its lowest level in one-and-a-half months on Thursday, weighed down by a sharp fall in the domestic share market and demand for the greenback from importers, but the central bank stepped in to limit further losses. Traders said the central bank likely sold dollars via state-run banks starting around 61.40 rupee levels to prevent a further fall in the local currency.
Traders will continue to monitor domestic share and debt price movements for clues on the direction of foreign fund flows which are key for the rupee's fortunes. So far this year, foreign funds have bought $14.1 billion in equities and $20 billion in debt. "The rupee opened largely flat but subsequently it started tracking the equity market. Negative sentiment in equities due to coal de-allocation by the Supreme Court hurt the rupee as well.
And there was some buying from importers also," said Pramod Patil, assistant vice president at United Overseas Bank. "Overall at the macro level too the dollar is strengthening, so we can see the negative bias on the rupee continue," he added. Patil expects the rupee to trade in a range of 61.00 to 61.75 until the central bank's policy review.
The partially convertible rupee ended at 61.34/35 per dollar compared with Wednesday's close of 60.96/97. The rupee dropped to as low as 61.4150, its lowest level since August 8. It declined 0.6 percent on the day, its biggest single-day fall since September 15. In the offshore non-deliverable forwards, the one-month contract was at 61.70, while the three-month was at 62.28.
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