The rupee weakened 32 paise against the US dollar on Monday to close at an almost two-year low of 65.31, amid strong demand for the greenback from foreign banks and importers coupled with a strengthening dollar overseas.
After gaining 10 paise to close at 65 on Friday, the rupee opened weak on Monday at 65.16 and slipped further to 65.38, before closing at 65.32, a level last seen in September 2013.
The Chinese central bank devalued the yuan by more than 4% last week putting pressure on other global currencies, including India.
A strong dollar demand by importers and foreign banks and a week macro-economic data put pressure on the rupee, said a dealer.
India’s exports contracted 10.3% in July and trade deficit widened to $12.8 billion, government data showed on Friday.
Some expect the rupee, which has outperformed other emerging market currencies this year, to likely to fall to around 65.50 per dollar in the coming days.
However, there is no real cause of worry yet, say analysts.
“It is not a cause of alarm as the fall is mostly due to the demand for dollars.
The fundamentals are strong and forex reserves are comfortable and the Reserve Bank of India will intervene in case of extreme falls,” said Shubhada Rao, economist at Yes Bank.