The rupee tumbled by 54 paise on Monday, as traders and banks stacked dollars, amid growing concerns on default in the euro zone. A weak performance by domestic equity markets also weighed on the Indian currency.
After opening at 47.63 and touching a low of 47.83 during the day, the rupee closed at 47.81 against the dollar, compared with the close of 47.27 on Friday. Last week, the rupee lost 1.5 per cent. The Bombay Stock Exchange (BSE) Sensex and National Stock Exchange Nifty fell around one per cent each. According to the BSE, there was a net fund outflow of Rs 166.22 crore on Monday.
“There are still uncertainties on what measures would be taken to avoid a default in the euro zone, because of which people are thronging to safe-haven currencies like the dollar,” said a forex dealer with a Mumbai-based public sector bank.
The forward premia rates softened across the curve, with a sharper move seen at the shorter end. The six-month forward premium ended at 2.93 per cent. At the close, the dollar was trading at 1.3661 against the euro.
Yields on the 10-year benchmark bond also eased, tracking global cues. The absence of fresh auctions this week also helped. The government has borrowed Rs 2.39 lakh crore through the sale of dated securities so far this financial year. The total government borrowing for 2011-12 is pegged at Rs 4.17 lakh crore . “There could be additional borrowing of around Rs 20,000 crore, owing to the growing fiscal deficit and oil subsidy burden,” said a treasury official of a Mangalore-based public sector bank.
Banks on Monday borrowed Rs 63,760 crore from the Reserve Bank of India (RBI) under the liquidity adjustment facility at the repo rate of 8.25 per cent. The interbank call money rate rose to a high of 8.35 per cent during on Monday’s trade. The weighted average call money rate, or RBI's target rate, closed at 8.30 on Monday. The overnight indexed swap (OIS) rates closed lower, tracking the downward movement in government bond yields. The three-year and five-year OIS rates closed at 7.14 per cent and 6.88 per cent, respectively.