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Month-end dollar demand from oil importers and hefty FII outflows dragged down the rupee today by 41 paise to close at new life-time low of 59.68, amid speculation that the RBI stepped in to check the currency slide as it approched nearly 60-mark.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 59.55 a dollar as against last weekend's close of 59.27. It continued its downslide to a low of 59.83, before recovering some ground to settle at 59.68 -- still showing a fall of 41 paise or 0.69%. The rupee's previous all-time closing low was 59.57 on June 20.
FIIs pulled out over $250 million (Rs 1,552.98 crore) from stocks today, provisional data from the bourses showed.
'Rupee closed weak taking cues from strong dollar and weak equities in India. Strong month end dollar demand from oil importers also weighed which pushed rupee again past 60.00 (futures) levels intra-day,' said Pramit Brahmbhatt, CEO, Alpari Financial Services (India).
With the the rupee coming near its alltime (intra-day) low of 59.97/98 levels, 'PSU banks were seen selling dollars at the behest of the RBI helping the rupee to some extent', said forex head of a leading private bank.
A weak rupee has a cascading effect on price rise as imports like oil become costlier amid the the government trying to revive growth in the economy.
The dollar index was up by 0.21% against a basket of six major global rivals. The US currency has been moving up after US Fed said it may taper off its $85 billion a month bond buying programme from later this year and ultimately end it 2014. This has sparked off fears that inflows to emerging markets like India will slow down as the US economy recovers.
Global brokerage firm Standard Chartered today lowered rupee forecast for the year end to 60.5 from 53 on the back of continued strength in US dollar, among other factors.
In order to arrest rupee depreciation, RBI has capacity to sell 'up to $30 billion' from the forex reserves, according to Bank of America Merill Lynch.
The Indian benchmark Sensex today plunged by 233.35 points to more than two-month low.
