The Indian rupee posted its biggest one-day drop in five-and-a-half months on Monday, bogged down by a sharp sell-off in local shares and hefty gains in the dollar versus higher-yielding currencies. The partially convertible rupee fell to an intraday low of 49.01 per dollar before closing at 48.955/965 per dollar, its lowest close since July 13 and 1.5 percent weaker than its Friday's close of 48.24/25.
This is the unit's biggest one-day loss since March 2, a day before it hit an all-time low of 52.2. "Everything seemed to be collapsing today, the stock market fall, euro and all other currencies coming off... but to some extent this was expected after the rally we saw," said P.V. Shreedharan, chief currency trader at Development Credit Bank.
"Overall the situation has not fully improved and the uncertainty about the monsoon is also there. We could possibly see levels higher than 49 and it could also possibly test 50 in about two months time or even before," he added. One-month offshore non-deliverable forward contracts were quoted at 49.06/16, weaker than the onshore spot rate.
The discount in the NDF market widened to about 0.1 rupee from 0.02 rupee seen in recent sessions, providing a good arbitrage opportunity. "The uptick in the dollar/rupee looks likely to continue, things are looking bad so we may open higher with gap tomorrow," Yes Bank's Somani said. In the currency futures market, the most traded near-month contract on the National Stock Exchange and MCX-SX closed at 48.9925 and 48.9975, respectively, with the total traded volume on the two exchanges at about $2.2 billion.
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