Rupee breaks 61 against dollar, hits record low

Mangalore Today/DHNS

Mumbai, July 8: The Indian rupee breached the 61 mark against the U.S. dollar for the first time ever on Monday, surpassing the previous record low of 60.76 hit on June 26. The partially convertible rupee traded at 61.09 as of 10.02 a.m. against Friday’s close of 60.23.

The Reserve Bank of India was spotted selling dollars via state-run banks, traders told Reuters. Three traders said the central bank likely started selling dollars when the rupee was trading at around 61.15 levels, while two other dealers said they were spotted a little later at around 61.21 levels.

 

The sharp plunge also affected sentiments in equity markets, with the BSE Sensex falling over 300 points in early trades today.

Fresh weakness came on better than expected U.S. jobs growth, which increased the likelihood that the Federal Reserve will begin cutting its massive monetary stimulus, known as quantitative easing, as early as September.

Traders fear that cuts in the U.S. bond buying programme will trigger massive selling by foreign investors, which will make the financing of India’s high current account deficit difficult.

Bond yields also jumped on fears that foreign investors would continue to sell rupee debt. The 10-year yield rose as much as 13 basis points to 7.63 per cent from its previous close.

Last week, the rupee fell 1.4 per cent last week and its nine-week losing streak is the longest since the last one ended June 3, 2012.

The Reserve Bank’s intervention has not been strong during the current bout of rupee weakness, with Governor D Subbarao’s comments on Thursday about the RBI not targeting any particular exchange rate also deepening the uncertainty.