The Indian rupee fell to near record lows on Monday as foreign investors continue to sell debt and stocks as part of an exit from emerging markets, with only fears of central bank intervention arresting a further drop. The rupee is likely to continue hovering around a record low of 59.9850 hit on Thursday as long as global markets remain weak over worries about the rollback of US monetary stimulus and concerns about China's financial sector.
Dealers were split about whether the Reserve Bank of India had intervened in the spot and onshore forward markets, suggesting any action would not have been strong. The central bank is seen likely to defend the 60 level for the rupee, which also provides formidable technical and psychological resistance. Reserve Bank of India Deputy Governor Anand Sinha said on Monday the central bank and the Indian government are doing whatever is needed to get a "hold over" the deteriorating macro economic conditions.
Investors are now awaiting the release of the current account deficit data on Friday, which will underline whether the funding pressures for the economy will further rise. "One key factor is whether foreign equity investors pull out. But the government and RBI look determined to take steps to stem the rupee's fall," said Samir Lodha, senior partner at QuantArt. The partially convertible rupee closed at 59.68/69 per dollar, against its previous close of 59.27/28. It fell to a low of 59.8250 in session.
In the offshore non-deliverable forwards, the one-month contract was at 60.14, while the three-month was at 60.84. In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 59.79 with a total traded volume of $6.4 billion.
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