The rupee on Monday depreciated by another 37 paise to close at 62.60 against the dollar following good month-end demand for the US currency from importers and a fall in local equities on rate hike concerns.
The rupee opened at 62.55 a dollar from the previous close of 62.23 at the interbank foreign exchange market. It moved in a range of 62.34 and 62.73 before ending at 62.60, a fall of 37 paise or 0.59 per cent. Last Friday, it declined by 46 paise.
“All the major Asian currencies were seen trading weaker against the US dollar and global stock markets were down,” said Abhishek Goenka, CEO of India Forex Advisors. “Negative stock markets continued to put pressure on the rupee.”
Month-end dollar demand from importers, mainly oil refiners, affected the rupee.
The benchmark S&P BSE Sensex today fell 362.75 points, or 1.79 per cent, on concern the RBI would increase rates further, after Friday’s surprise hike, to curb inflation.
“The trading range for the spot USD—INR pair is expected to be within 62.10 to 63.10,” said Pramit Brahmbhatt, CEO of Alpari Financial Services (India).
Foreign institutional investors bought a net $214.77 million of shares on Friday, according to Sebi data.
US stocks fell last Friday after Federal Reserve Bank of St Louis President James Bullard said the Fed could make a small stimulus reduction at its next meeting in October.
A tapering of the monthly $85 billion bond purchases could see an outflow of dollars from emerging markets, including India, as a recovering US economy draws investors.
Department of Economic Affairs Secretary Arvind Mayaram on Monday said there is no room to be fearful of the rupee tanking when the US Fed eases the monetary stimulus because the Indian government has enough ammunition to deal with the situation.
Mr. Mayaram said the rupee should ideally be at 58—60 to a dollar, based on the intrinsic value of the domestic currency.
Forward dollar premiums recovered on fresh payments from banks and corporates.
The benchmark six—month forward dollar premium payable in February edged up to 232—237 paise from 232—235 paise previously and far—forward contracts maturing in August improved to 438—443 paise from 433—438 paise.
The RBI fixed the reference rate for the dollar at 62.52 and for the euro at 84.6710.
The rupee dropped to 100.50 against the pound from 99.76 on Friday and to 84.59 per euro from 84.26. It dipped against the Japanese yen to 63.29 per 100 yen from 62.62.