The rupee on Monday slipped below 60-mark and closed sharply down by 39 paise at a six-week low of 60.16 against the dollar on sustained demand of the American currency from oil importers, amid rising oil prices.
Weakness in local equities on the back of rise in wholesale price index (WPI)-based inflation, also weighed down the rupee. Increase in global crude oil prices to nine-month highs on escalating Iraq crisis compelled importers, mainly oil refiners, to buy more dollars to meet their requirements, a forex dealer said.
The dollar index was almost stable against a basket of six major global currencies. At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 59.82 a dollar from previous close of 59.77 and immediately touched a high of 59.80.
Later, it fell back to a low of 60.23 before settling at 60.16, a fall of 39 paise or 0.65 per cent. Last Friday, it had tumbled by 52 paise or 0.88%.
Previously, the rupee had finished at 60.21 against the dollar on May 5, 2014. Anindya Banerjee, currency analyst, Kotak Securities, said: "A cocktail of geo political risks, domestic monsoon worries and higher than expected wholesale inflation has pushed the rupee.
A mix unwinding of shorts from large specs as well as hedging from importers has been responsible for the recent surge in the US dollar."
The Indian benchmark S&P BSE Sensex today declined by another 37.69 points, or 0.15%, while FIIs brought shares worth Rs 1,099.92 crore last
Friday, as per provisional data. Pramit Brahmbhatt, Veracity Group CEO said: "Already the rupee was trading weak on the growing tensions in Iraq. In two days, rupee has depreciated nearly one and half per cent. The trading range for the Spot USD/INR pair is expected to be within 59.70 to 60.80."
Experts feel the sudden weakness in rupee and rising crude price could hit business and economic revival unless stability in the currency comes back soon. "With the INR on a weak trend again and with global oil prices going up, it is yet not clear what type of input side pressures the Indian business community would have to build into their business models," said Indranil Pan, Chief Economist, Kotak Mahindra Bank.
Debopam Chaudhuri, Chief Economist, ZyFin Research said: "The recent spike in crude oil prices has once again led to volatility in the Indian currency.
However, we strongly feel that the rate will soon stabilise, with the September quarter averaging at 58.5." The premium for forward dollar remained weak on continued receipts by exporters. The benchmark six-month premium payable in November eased to 227-229 paise from Friday's close of 228-230 paise. Far-forward contracts maturing in May, 2015 also declined to 462-464 paise from 467-1/2-469-1/2 paise.
The Reserve Bank of India fixed the reference rate for dollar at 60.0059 and for the euro at 81.2541. The rupee dipped further to 102.07 against pound to 102.07 from 101.31 previously and also plunged against the euro to 81.46 from 80.87. It dropped to 59.09 per 100 Japanese yen from 58.59.