The rupee breached the 52-mark against the dollar for the first time on continued pressure from overseas investors who are offloading domestic securities.
After touching a new lifetime low of 52.18 during the intra-day trade today, the Indian currency recovered to close at 51.97 against the dollar, which was three paise lower than yesterday’s close.
Dealers said the currency weakened for a seventh day, the longest losing streak since October, as foreigners sold Indian shares than they bought on all but five of the 19 trading days last month.
The Sensex dropped 2.1 per cent in response to a sharp fall in the American capital markets yesterday. "The trend is clear, we are going to have more rupee weakness. The risk aversion is maximum," said a currency dealer with a foreign bank.
The Indian rupee is the third-worst performer in the past 12 months among the 10 most-traded Asian currencies, with a 22 per cent loss. South Korea’s won and Indonesia’s rupiah have declined more.
Funds based abroad sold $1.72 billion more Indian equities than they bought this year, after withdrawing more than $13 billion in 2008, according to data released by the Securities and Exchange Board of India.
RBI Deputy Governor Shyamala Gopinath said: "The central bank is closely monitoring the situation. The dollar has strengthened against other major currenicies in the world. Our policy regarding rupee has not changed. We remain committed against excessive volatility."
Offshore contracts indicate that the rupee will trade at 52.33 to the dollar in a month, compared with expectations for a rate of 52.38 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery.
Non-deliverable contracts are settled in dollars rather than the local currency.
