Tumbling from a six-week high, the Indian rupee on Tuesday saw its biggest daily loss in over a month as it slumped 31 paise to end at 60.60 against dollar on concern that U.S. interest rates may rise sooner than investors had anticipated.
Weakness in local equities and fresh dollar demand from importers also weighed on the rupee, said forex brokers.
The dollar rose to an over five-year high against Japanese yen and about a 14-month high versus Euro. This marks a comeback after the Greenback dropped on Friday following a weak jobs report that had dampened speculation of rise in U.S. rates.
At the Interbank Foreign Exchange (Forex) market on Tuesday, the rupee commenced weak at 60.45 a dollar from previous close of 60.29. This was in line with slip in local shares.
The rupee then tried to recover and logged an intra-day high of 60.4050. The momentum, however, could not be sustained and it fell back to a low of 60.66, before settling at 60.60 — a net fall of 31 paise or 0.51 per cent. This is its biggest single day loss since 65-paise drop on August 6, 2014.
At the closing level, the rupee is just short of its one-week low of 60.68 hit on September 2. On Monday, rupee had gained 10 paise or 0.17 per cent to close at 60.29, a six-week high.
The Indian equity benchmark S&P BSE Sensex on Tuesday declined by 54.53 points, or 0.20 per cent. Foreign portfolio investors had injected $188.54 million on Monday, as per SEBI data.
In global currency markets, the widely-tracked dollar index was up against rivals. Most Asian currencies were trading weaker compared to the U.S. dollar.
Changes in U.S. interest rates can reverberate throughout the global financial system. Rising U.S. dollar interest rates lower the attractiveness of investments in other currencies.
Pramit Brahmbhatt, Veracity Group CEO said: “Rupee closed weak taking cues from strong dollar as it continues to trade positively. Local equities closing on a weak note further dented the rupee movement. Also, the dollar demand from importers and corporates weighed.”
The trading range for the spot USD/INR pair is expected to be within 60.20 to 61.00, he added.
