Rupee plunges to 2-year low, stokes banking crisis fears

Mumbai: The rupee slid to its lowest in nearly two years on Wednesday, as worries that Europe’s debt problems may snowball into a banking crisis roiled global markets and pushed investors to the dollar’s perceived safety.

The partially convertible Indian currency weakened past 48 to the dollar, stretching a losing streak to an eighth session, and traders said the drop of 4.7 percent since the close of September 2 was likely overdone.

[caption id=“attachment_83789” align=“alignleft” width=“380” caption=“The rupee’s weakness has pushed investors to the dollar’s perceived safety. Reuters”]  [/caption]

“The slide in the rupee in the last few days has been pretty sharp and this is happening without any large scale dollar outflows,” said Ananth Narayan G, head of fixed income, currencies and commodities at Standard Chartered Bank. “I don’t think it will sustain at 48 as exporters and real investors should come to sell.”

More from Fwire

BCCI earned more than Rs 2,400 crore in IPL 2022, reveal documents Eight Russian judokas barred from world championships after Ukraine boycott

At 10:45 a.m. (0515 GMT), the rupee was at 47.84/85, 0.5 percent weaker than Tuesday’s close of 47.59/60. It had touched 48.02 in early deals, last reached on September 29, 2009.

Compared with the unit’s strongest level this year of 43.8550 on July 27, the rupee has shed as much as 8.7 percent. August inflation data’s impact on the stock market will be watched, traders said.

The wholesale price index (WPI) is likely to have risen an annual 9.6 percent last month, economists polled by Reuters showed, which could pile pressure on the central bank to raise rates at its scheduled policy review on Friday.

Another Reuters poll released on Monday had forecast the Reserve Bank of India would most probably raise the repo rate, or lending rate, by 25 basis points this week. The euro was at $1.3634, below $1.3678 at the end of the rupee trade on Tuesday, while the index of the dollar against six major currencies was at 77.286 points from 77.094 previously.

The one-month onshore forward premium was at 16.75 points from 14 on Tuesday, the three-month was at 40.75 points form 34.50 and the one-year was at 100.25 points from 91.25.

One-month offshore non-deliverable forward contracts were quoted at 48.03, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange were all at 47.9225. The total volume was $2.96 billion.

Reuters