Indian rupee fell to its lowest level in the last one week on Thursday with the unit ending 39 paise down at 66.85 against the dollar from its previous close of 66.46 on Wednesday.
Indian rupee in tandem with domestic equity markets also fell in a knee-jerk reaction after government claimed surgical strikes on terrorist camps in Pakistan in the aftermath of Uri attack. The local currency fell to its lowest level in the last one week on Thursday with the unit ending 39 paise down at 66.85 from its previous close of 66.46 on Wednesday. Domestic stock markets also slumped as soon reports of surgical strikes against Pakistan terrorist camps broke. Sensex fell 465.28 points to end at 27,827.53, while NSE Nifty slupmed 153.90 points to 8,591.25.
“Indian Rupee dropped sharply as sell-off was widespread in local bonds and local equities. Market was caught on the wrong foot as carry traders were short USD and had to run for cover as prices spiked. Spreads between onshore and offshore forward/futures narrowed for eg, spread 3 month spread narrowed from 20 paise to 8 paise now and 12 month spread narrowed from 30 paise to just 10 paise now. We hope there is no military escalation between India and Pakistan. Barring such an event we can normalcy to return soon. Over the near term we can see a range of 66.40/50 and 67.15/30 on spot. Traders would be keen on buying local bonds into the correction, ahead of the RBI monetary policy, ” Anindya Banerjee, currency analyst, Kotak Securities said.
The weakness in domestic currency intensified on concerns that foreign investors, who have pumped in about Rs 50,000 crore into domestic stocks so far this year, may run for the exit door if the tensions were to rise further. On the global front, dollar rose against the safe-haven yen on Thursday to hit an eight-day high as investors moved into riskier assets following an OPEC deal to cut oil output.
The Indian rupee surged by 3 paise to 66.43 against the US dollar in opening trade. The currency hovered in the range of 66.4275 – 66.9150. The Reserve Bank of India’s (RBI) reference rate for the dollar stood at 66.55 and for Euro stood at 74.68 on September 29, 2016. While the RBI’s reference rate for the Yen stood at 65.43, the reference rate for the Great Britain Pound (GBP) stood at 86.61.The reference rates are based on 12 noon rates of a few select banks in Mumbai.