India's rupee dived to a five-year low on Monday, as weak local and global stocks and month-end dollar demand from oil firms dragged heavily while intervention by state-run banks offered little respite. The partially convertible rupee ended at 46.95/96 per dollar, off an intraday trough of 47.11, which was its lowest since June 2, 2003, and 0.9 percent weaker than 46.545/555 at the close on Friday.
"Since tomorrow is a holiday, the spill-over of the month-end dollar demand from commercial banks and a negative stock market ... pushed it below the psychological (47 to a dollar) level," said U. Venkataraman, head of treasury at IDBI Bank. "We saw sporadic presence of state-run banks selling dollars but the demand was too high," he added.
The currency and bond markets will be shut on Tuesday for half yearly book-closing of banks. World stocks lost heavily on Monday, led by sharp falls in Europe as three European banks became the latest casualties of spreading credit woes, forcing partial nationalisation's and overshadowing Washington's bailout plan.
Indian shares fell to an 18-month low before trimming their losses to end down 3.9 percent, as fears grew about the spreading global financial crisis would see more foreigners repatriate their investments. Foreigners have sold a net $9.3 billion of Indian shares so far in 2008, after buying a record $17.4 billion last year.
Dealers said state-run banks were likely to have sold more than $1 billion to help the rupee recover from the day's lows. The rupee has been under pressure in recent sessions from heavy dollar demand from oil firms and importers scrambling to meet month-end import commitments.
Refiners are the largest buyers of dollars in the domestic currency market. India imports about 70 percent of its crude needs. Oil was trading below $103 per barrel. Dealers said the dollar's strength overseas also weighed on investor sentiment. The euro and sterling tumbled more than 2 percent against the dollar as the impact of the latest financial storm fanned out beyond the United States.