The rupee, on Tuesday, closed at nearly six-month low of 55.41 a dollar, a slump of 30 paise compared to its previous close of 55.11, due to high dollar demand.
Profit-booking in domestic equity markets accelerated the fall in value of the rupee against the U.S. dollar. Even though it opened at 54.97 on Tuesday the demand for U.S. dollar weakened the Indian currency. This is rupee’s lowest level this calendar year. It had closed at 55.45 on November 27, 2012.
“Rupee dropped sharply against the dollar in today’s [Tuesday’s] trading session to test this year’s low of 55.41 in spot market,” said Sugandha Sachdeva, Currency Research, Religare Securities Limited.
The strengthening of the U.S. dollar against the rupee was largely attributed to upswing in dollar index as the market was awaiting Fed minutes from the U.S. that were to be released on Wednesday, she added. The Fed may hint at tapering off its bond buying programme later this year and the concerns are fuelling a rally in dollar.
Further, adding to the rupee weakness was the profit-booking witnessed in equity markets. Moreover, price pattern indicates U.S. dollar / rupee pair had broken out of a triangle formation and seems ripe for a target of 56 in the coming days, said Ms. Sachdeva.
On the downside, the pair will find strong support at 55.20.