Rupee hits 17-month low in volatile trading

Rupee hits 17-month low in volatile trading
Lack of participation weighs on markets

The rupee fell to its lowest in 17 months on Monday, hit by a weak stock market and some lumpy orders in a holiday-thinned market that was also factoring in some recent dollar strength. The partially convertible rupee ended at 43.59/60 per dollar, recovering slightly from a intraday low of 43.70, its lowest level since March 29, 2007. The rupee fell 1.33 percent from Thursday's close of 43.01/02, its biggest percentage fall in a year. It has fallen by 3.5 percent in the last five sessions and is down 9.6 percent in 2008. It rose more than 12 percent in 2007.

Markets were closed on Friday will shut again on Tuesday for local holidays, which meant many trading rooms were thinly staffed. Trade was volatile, with the rupee trading a 43.05-43.70 band, and traders said there was heavy dollar buying by a large manufacturing company around 43.50 per dollar. "This sharp fall looks like some stop-losses have got triggered and even offshore markets are pointing to a weaker rupee," said R N Hirve, chief dealer at Central Bank of India.

One-month offshore non-deliverable forward contracts were quoting at 43.81/86 per dollar. The dollar hit a six-month high against the euro on Monday, although its surrendered the gains later in the day. The euro has fallen nearly six percent against the dollar in two weeks on concerns of an economic slowdown. Speculation the central bank may step in to stop the rupee's fall proved unfounded.

"There was some talk it may intervene around the 43.50 per dollar, but once that level broke conclusively, it fell like a stone," said a dealer at a state-run bank. Data on Thursday showed the central bank sold $7 billion in intervention in June, the biggest single-month dollar sales since it began publishing the data in April 1995. A weak finish on the stock market also weighed on sentiment. The benchmark index ended down 0.5 percent, a fourth successive fall, and is down 28 percent for the year. Foreigners sold about $250 million of stocks last week, taking their net sales for the year to $6.8 billion. They bought a record $17.4 billion in 2007.


Source: Economic Times.com