The Indian rupee dropped to its lowest since end-May on Monday as the dollar rallied sharply against majors and the domestic stock market fell more than 2 percent. The partially convertible rupee closed at 47.72/73 per dollar after hitting 48, its weakest since May 28, and 0.2 percent below its Friday's close of 47.61/62.
"The rupee was largely tracking moves in the euro/dollar today," said Madhusudan Somani, head of forex trading at Yes Bank. He said some foreign banks sold dollars, helping the rupee come off lows. "There was decent selling by exporters around 48," Somani said, adding some state-run banks also sold dollars at that level but the action did not look like intervention on behalf of the central bank.
The Reserve Bank of India has previously said it buys or sells dollars in the market to prevent excessive volatility. It has been in recent sessions buying dollars to prevent sharp rupee appreciation beyond 47, dealers said. "The rupee is unlikely to head back towards 47 very soon. The equity markets too are set for a correction and so is the USD in G7 countries. The dollar-rupee might move higher before it comes down again," Somani said. "We may see 48.25/30 levels which was within striking distance today."