Mumbai: Negative cues eminating out of China coupled with bearish equity markets resulted in the rupee falling to its lowest levels against the US dollar in over two years during the intra-day trade on Monday.
The Indian currency was trading at 66.83 to a dollar at 4.00 p.m., down 37 paise from its previous close of 66.46 on Friday (September 4, 2015). The rupee had touched an intra-day high of 66.85.
The rupee had last breached the 66.80-level to a greenback on September 4, 2013.
The Indian currency came in for a beating as frantic dollar-buying in China devalued the off-shore yuan and other Asian currencies, including the rupee.
The volatility started after reports from China suggested that the central bank there was planning to impose stringent regulations on foreign exchange purchases from October to curb speculation and volatility.
Interestingly, the Chinese yuan was two percent weaker in off-shore markets than domestically.
“The rupee is being impacted from the pressure put on yuan (devaluation) and the expected shortfall of dollars in China due to the reports on new regulations,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities explained to IANS.
“The macro data on foreign reserves from China suggest there has been a huge outflow of funds despite direct investments and exports.”
The rupee’s downward spiral also impacted the barometer index of the Indian equity markets the 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) which plunged by over 308 points or 1.22 percent at close of trading on Monday.
Investor confidence was eroded on the back of fears of an interest rate hike in the US, weak monsoon and bearish Asian markets.