Rupee falls sharply on China, West Asia jitters

Dives most in nine weeks, to close at 66.62 against $

The Indian rupee fell 0.72 per cent on Monday, mirroring weaknesses in other Asian currencies, as the Chinese economy slowed down and instability in the middle-east increased after Saudi Arabia severed diplomatic ties with Iran.

The rupee closed at 66.6175 a dollar on Monday, down about 48 paise from its previous close in response to the rise in uncertainty. The local currency opened at 66.27 a dollar and traded in the range of 66.2650 and 66.63 a dollar. The market saw some heavy dollar buying at the end of the market hours.

The Indian rupee touched almost 67 a dollar level on December 11, but currency analysts are not very sure if the local currency will test those levels soon. "The movement is more of a risk-off and panic situation. We need to wait for a day more to say with some certainty that the trend has reversed and the rupee will breach 67," said Abhishek Goenka, head of IFA Global, a currency consultant.

According to technical chartists, there is a strong support level at 66.75 level and if this level is breached, rupee may slide to 67 a dollar level.

"Most probably, the rupee will trade between 66.10-66.75 a dollar level this week, unless some more global uncertainties hit the market," said a senior currency dealer with a foreign bank.

In the offshore non-deliverable market, traders are expecting rupee to reach 66.67 a dollar level and in a month the traders are betting on 66.91 a dollar.

  "Rupee should strengthen back; Monday was an oversell," said the currency dealer with the foreign bank.

Exporters were seen selling dollars in the market even as there was strong dollar buying interest from importers. The presence of Reserve Bank of India was not very apparent, said currency dealers.

In response to the slowdown in China, South Korean Won fell 1.270 per cent, Taiwan dollar fell 0.675 per cent, Singapore dollar fell 0.863 per cent, and Indonesian Rupiah fell 0.810 per cent. However, Japanese Yen rose 1.499 per cent against the dollar.

Overall, the Chinese Offshore Yuan depreciated 0.932 per cent against the dollar, while the onshore Yuan fell 0.668 per cent. The yields on the nine-year benchmark bond closed at 7.733 per cent, flat from its previous close of 7.730 per cent.