MUMBAI: The rupee fell the most in over a year to close at 83.53 against the dollar, down 42 paise over Monday’s close. Prices of govt bonds also fell sharply, with the yields on the benchmark 10-year bond rising by over 5 basis points (100bps = 1 percentage point) to cross 7%.
The rupee came under pressure following a nearly 6% drop in equity indices, where foreign investors are believed to have sold their stakes.
“While equity markets had seen a huge run-up amid recent volatility, volatility in the forex market has been extremely low… it may rise in the short term as political clarity emerges. Going forward, it is back to global cues for the forex market… the rupee should trade within a range of 83 to 84 against the dollar,” said Ashhish Vaidya, head of treasury, DBS Bank. “The India story is still intact. It is not getting derailed and hence, the rupee should remain well-managed and within a range,” he added.
Dealers said that the rupee hit an intra-day low of 83.65, but dollar sales by public sector banks – ostensibly at the behest of RBI – led to a marginal recovery in the exchange rate.
