Re loses on heavy FII selling

Large-scale selling by foreign institutional investors in the Indian equity market and a sudden rise in dollar demand in the non-deliverable forward (NDF) market in Southeast Asia dragged the rupee down by almost one per cent today.

The Indian unit crossed the psychologically important 45.50-to-a-dollar mark. It hit an eight-month low, 45.58 to a dollar intra-day, but recovered to close to 45.48/49.

The market was hit by a massive dollar demand by custodian banks which were buying dollars for their FII clients seen booking profits in the equity market.

At the same time, apprehending a bearish rupee, the FIIs were also engaged in buying dollars in the local market and selling them in the NDF market, the offshore market where players punt on movements of the currency.

"There were equities from the Reserve Bank of India after the rupee crossed the 45.50 level and some token selling of dollars (by the state-run banks), which cannot be termed as intervention by the banking regulator," said a foreign exchange dealer.

The weakening of the rupee was an all-Asian phenomenon today. Most Asian currencies fell on the back of falling equities with the only exception being the yuan which rose.

Among the Asian currencies, the Indonesian rupiah suffered the most, while the South Korean won retreated from its eight-and-a-half-year high against the dollar, hit last week.

The yen lost to 110.40 to a dollar after opening at 109.50; won from 935 a dollar to 944 and the Singapore dollar from 156 to 158 a dollar.

The bond market, too, was bearish with the 10-year benchmark bond yield touching 7.60 per cent against its last week's closing of 7.54 per cent. The prices of government securities fell, tracking the rising yields of the US treasury bonds.