The Indian rupee notched up its steepest single day drop in more than a month on Monday, weighed down by falling stocks and dumping of the local unit in offshore currency markets. The partially convertible rupee ended at 48.01/48.03 per dollar, its lowest level since December 16 and 1.6 percent weaker than Friday's close of 47.25/26.
It was the rupee's largest decline in a session since November 13. The unit has gained 4.3 percent so far this month but is still down 18 percent in 2008. "A combination of factors such as negative stocks, positive offshore dollar/rupee and some corporate (dollar) buying between 47.30-47.50 have pulled the rupee lower," said R.A. Sankaranarayanan, chief of trading at state-owned Bank of India in Mumbai.
The dollar rose against the Japanese yen following a steep interest rate cut by the Bank of Japan on Friday and after its chief said Japan's economy was deteriorating and conditions were likely to become more severe. The rupee was also pressured lower by heavy dollar buying in the offshore non-deliverable forward market, dealers said. One-month contracts were quoting at 48.38/53 per dollar, stronger than the onshore closing rate.
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