The rupee fell to a lifetime low of 49.26 against the US dollar in morning trade on Friday before recovering to close at 48.47 on intervention by the Reserve Bank of India and sale of the greenback by local banks and exporters.
The fall in the rupee in the morning was due to the stock market crash on the sale of shares by foreign institutional investors (FIIs). This prompted banks to purchase dollars on behalf of their FII clients repatriating money.
The previous low of 49.05 against the dollar was seen on May 16, 2002. At 48.47, the rupee closed at its lowest level against the dollar since September 10, 2002, when it closed at 48.49.
This was the ninth week in a row when the rupee fell and a similar losing streak was last seen in 2005. The currency fell as much as 4.4 per cent from a week ago to 49.26, the biggest loss since March 1993.
“The situation remains fluid as the extent of fund withdrawal from India is very high compared to the flows into the market,” said the treasury head at a large public-sector bank.
Dealers said that with the rupee falling continuously, the RBI has been checking with banks on their foreign exchange positions more regularly. They added that on Friday, the RBI intervened in the market regularly. Some dollar buying was also attributed to arbitrage opportunity between the local and the non-deliverable forward (NDF) markets, dealers said. The one-month dollar-rupee NDF rate was at Rs 49.7500 per dollar, while the local outright forward rate was Rs 48.3300, giving rise to an arbitrage of about 145 paise between the two markets.