Rupee hits 4-month intra-day low

ANDHRA TREMOR ROCKS MARKETS

The rupee on Tuesday pierced the psychologically important 45.50 level to touch a four-month low of 45.56 to the dollar during the day but closed at a higher level of 45.37/42, losing about 0.8 per cent.

On Monday, the rupee closed at 45.07. The rupee has lost close to 2 per cent over the last two trading sessions from its Friday closing level of 44.65.

The impact on the government bond market was not severe today. The yield on the benchmark 10-year paper rose to 5.22 per cent as the prices came down but later it settled at around 5.19 per cent, virtually unchanged from Tuesday's level.

Foreign exchange dealers expect the rupee to dip further and inch towards the 46 level by the end of this week even as the spectre of a hung Lok Sabha looms large over the market.

"If the country does not have a stable government at the Centre, the local currency will lose value further against the greenback. The next few days will be crucial for the currency market," said a dealer at a foreign bank.

The rupee has fallen by 2.5 per cent since the last week of April on concerns about the outcome of the general elections. It has wiped out almost the entire gain against the dollar made in 2004, up just 0.4 per cent from the December 31 closing of 45.5950/6050. On April 7, when it recorded a 51-month closing high of 43.5450/5500, the rupee had gained nearly 5 per cent in 2004.