Riding on global currency volatility wave, the Indian rupee today plummeted sharply by 29 paise to close at a fresh two-year low of 65.83 against the US dollar on high demand for greenback from banks and importers.
Heightened fears of a China-driven global economic crisis as well as worries of imminent Fed rate hike predominantly kept intense pressure on the domestic currency.
Besides, escalating tensions between South Korea and North Korea and weakness in emerging market currencies weighed on sentiments.
A combination of domestic factors like growth constraints in the midst of lack of revival in investment climate as well as weak earnings made a strong case for erosion in the rupee value, forex dealers said.
Heavy offloading in portfolios by foreign investors and global traders also led to the sudden rupee weakness, they added.
While, dollar continued to trade weak against a basket of other major currencies and slipped to a fresh six-week low, following emergence of confusing signals from the US Federal Reserve meet.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced sharply lower at 65.73 as against Thursday’s closing level of 65.54 at the Interbank Foreign Exchange (Forex) market on strong demand for the American unit as well as tracking early sell-off in local stocks.
It kept on descending as trading progressed to hit fresh two-year low of 65.91 in mid-afternoon trade before concluding at 65.83, revealing a sharp loss of 29 paise or 0.44 per cent.
The rupee had touched a high of 65.69 during the session.
The US dollar index, which tracks the greenback against a basket of six major currencies, was 0.38 per cent lower at 95.41.
Meanwhile, the benchmark BSE Sensex ended sharply lower by 241.75 points, or 0.88 per cent, to settle at 27,366.07. Foreign portfolio investors (FPIs) sold shares worth a net Rs 1,007.26 crore yesterday, as per provisional data released by the stock exchanges.
Veracity Group CEO Pramit Brahmbhatt said, “The rupee continues to trade weak on subdued cues from local equities which closed almost one per cent down. The yuan devaluation is expected to force the rupee to depreciate further.”
The trading range for the Spot USD/INR pair is expected to be within 65.40 to 66.40.
In the forward market, premium for the dollar displayed a steady to firm trend.
The benchmark six-month premium payable in January ended virtually steady at 191-193.
However, far-forward contracts maturing in July 2016 recovered to 414.5-416.5 paise against 412-414 paise yesterday.
The RBI fixed the reference rate for the dollar at 65.8298 and for the euro at 74.2692.
The rupee dropped against the pound sterling to end at 103.22 from Thursday’s close of 102.64 and plummeted against the euro to finish at 74.24 from 73.24 in the previous session.
The rupee also slumped further against the Japanese currency to 53.64 per 100 yen from 52.86 yesterday.