The rupee fell a massive 67 paise to an all-time closing low of 61.10 against the dollar despite slew of steps taken by the government and the central bank in the past few weeks to support the battered currency.
There was heavy dollar demand from importers, mainly oil refiners, and some banks on behalf of their clients as hopes of a strengthening dollar overseas weighed on sentiment, a forex dealer said. Better than expected US GDP growth has boosted the US dollar.
At the Interbank Foreign Exchange Market, the rupee resumed lower at 60.61 a dollar from the previous close of 60.43 and touched a high of 60.58.
As local stocks declined, the rupee continued its downward march and touched a low of 61.17 before closing at an all-time low of 61.10, a fall of 67 paise or 1.11 per cent. The previous record low closing was 60.72 on June 26. However, the rupee touched all-time intra-day low of 61.21 on July 8.
“The moves by the government to curb rupee volatility and tame the exchange rate have partly worked,” said Ashtosh Raina, head of forex trading at HDFC Bank. “As long as there is no matching demand for the rupee, the dollar will always weigh heavy. That is what we have seen. The current account deficit (CAD) is still a major issue.”
In another attempt to support the rupee, the Reserve Bank yesterday made it mandatory for foreign institutional investors to obtain the consent of holders of participatory notes and derivative instruments before hedging. Earlier, the central bank tightened liquidity for banks and took steps to curb speculative activity in forex markets, among others.
The S&P BSE Sensex today fell for the eighth day, dropping 153 points, or 0.79 per cent, reversing early gains that came on the back of liberalised FDI norms. FIIs bought shares worth a net $46.28 million on Thursday. The dollex index, consisting of six global rivals, was up 0.09 per cent.
“Today also, RBI intervention was suspected in the forex markets to support rupee,” said Pramit Brahmbhatt, CEO of Alpari Financial Services. “Trading range for spot USD/INR pair is expected to be within 60.80-61.50.”
“The rupee’s weakness was mainly attributed to the upbeat data from the US, which sent the US dollar index to its one-week high,” said Abhishek Goenka, Founder and CEO of India Forex Advisors. “Although the central bank took some measures to stem the fall in rupee, it could not provide a long lasting relief to the currency.”
RBI Governor D Subbarao on Friday reiterated that liquidity tightening measures will be rolled back only after stability is restored in the forex market as volatility hurts growth.
“While steps initiated by the government, Sebi and RBI have been able to help rupee not breach 62-levels, one must bear in mind all these steps will need be given some more time to see their full effect,” said Dhanlaxmi Bank Executive Vice-President (Treasury) Srinivasa Raghavan.
Forward dollar premiums recovered on fresh payments by banks and corporates.
The benchmark six-month forward dollar premium payable in January rose to 259-264 paise from the previous close of 251-255 paise. Far-forward contracts maturing in July firmed up to 470-475 paise from 458-460 paise.
The RBI fixed the reference rate for the dollar at 60.8035 and for the euro at 80.3655.
The rupee remained weak against the pound sterling to end at 92.57 from the previous close of 92.07 and fell back to 80.70 against the euro from 79.99. It edged up against the Japanese yen to 61.22 per 100 yen from 61.25.