Rupee falls the most in 23 months to hit 66.68 per US dollar

Mumbai: The Indian rupee on Monday weakened 1.3% against the US dollar—the steepest fall since 3 September, 2013, following a global sell-off across risk assets, including the domestic equity markets.

At 2.22pm, the home currency was trading at 66.62, down 1.24% from its previous close of 65.83. The local unit opened at 66.39 per dollar and touched a low of 66.68—a level last seen on 4 September, 2013.

“The rupee has weakened because of a fresh bout of sell off in the Chinese equity market which has also impacted local markets here. State-owned banks have been trying to support the rupee today but I expect the currency to remain weak at least for the rest of the week. We are now headed towards 67 per dollar,” said Ashish Vaidya, executive director and head fixed income trading at DBS Bank Ltd.

Intraday, the Sensex and Nifty fell 5.2% -- the steepest percentage fall since 7 July, 2009. In intra-day trade, the Sensex fell as much 1,415.10 points, or 5.17%, to 25,950.97, while the Nifty slumped 443.05 points, or 5.34%, to 7,852.10.

Most other Asian currencies were also trading lower. The Malaysian ringgit was down 1.4% while the Taiwan dollar was down 0.61%, Indonesian rupiah 0.54% and South Korean Won 0.34%. The Japanese Yen gained 1% in trade.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.372, down 0.7% from its previous close of 95.01.

“Our assessment of the current move is that it is a profit booking, stop-loss move which will continue for awhile. The rupee will not be beaten as much as it’s peers and will also be the one to bounce swiftly once markets calm down,” said Samir Lodha, managing director at QuantArt Market Solutions

So far in August, the rupee has fallen over 3.7% -- the worse month for the currency in at least two years. Since the beginning of this year, the rupee has lost 5.4%. On a net basis, foreign institutional investors have bought $6.81 billion in the local equity and $6.37 billion in the bond markets so far this year.

Speaking at a conference in Mumbai on Monday, RBI governor Raghuram Rajan said that India has adequate reserves to prevent undue volatility.

“India has $355 billion of reserves and another $25 billion because our forward dollar sales are not due for the next one year; so, we have $380 billion to play with if needed,” said Rajan.

“We try to prevent undue volatility. If we see undue volatility, we have the resources to deal with it,” he said.