At 2:35 p.m., the rupee was at 55.97 levels, 1.04 per cent or 57 paise lower than Friday’s close of 55.40. It had earlier touched the day’s low of 56.07 against dollar, the lowest in a week.
Indian stock markets too fell on Monday on weak global cues. However, the losses were mild as compared to its Asian peers. At noon, the Sensex was down 114 points, or 0.65 per cent to 17,407, while the Nifty index traded 40 points lower at 5,277.
Markets in Asia extended losses on the back of disappointing US jobs data. Japan's Nikkei index was down 1.4 per cent, while Hong Kong's benchmark traded 1.5 per cent lower. (Read More)
Euro plummeted a two-year low versus the greenback early on Monday, while high-beta currencies like the Australian dollar nursed losses with markets still smarting after tepid U.S. jobs growth dealt a blow to risk sentiment late last week.
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The rupee had rallied more than 5 per cent in the four sessions from June 28 to Tuesday, sparked by hopes of renewed commitment by the government to tackle policy reforms. However, it is still down over 10 per cent from its 2012 high, reached in early February. It has strengthened on the back of clarity on taxation rule – GAAR, dollar sales by investors along with a positive outlook for Europe after the leaders agreed on a deal for tighter fiscal union in the longer term.
However, ratings agency Fitch warned that the rupee is not likely to appreciate in the short term until global risk aversion subsides; but fall further if global risk aversion worsens or the domestic fiscal position deteriorates. It also said that if the depreciation persists, it might affect the credit ratings or outlook of some companies. (Read More)
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The RBI has intervened repeatedly after the currency resumed declines to record lows against the dollar, mirroring declines in May. It went on to hit its lowest level in June.
The rupee had earlier failed to gain traction despite measures announced by the central bank on India to bolster the currency, including raising the investment limits on government bonds for foreign investors. It had also asked oil companies to get 50 per cent of their dollar needs from state-owned banks.
Concerns over slowing growth, rising inflation too affected investor sentiment and the equity and currency markets. While GDP slowed to 5.3 per cent in the fourth quarter of FY12, inflation has been persistently over comfortable levels. Credit rating agencies Fitch and S&P too warned about a paralysis in policy making affecting the country.
The domestic worries, compiled with global risk aversion on account of the Euro crisis had been weighing on the rupee, which had fallen close to 7 per cent this year, making it the worst performing currency.
With inputs from Thomson Reuters 2012