Rupee down 1.5% to near-record closing low of 58.77 a dollar

The rupee hit levels near Monday's record closing low at 58.77/78 against the dollar today, losing 1.5 per cent of its value amidst continued fund outflows. The Indian currency had closed at 57.87/88 against the dollar yesterday, surpassing the previous closing low of 58.39 a dollar hit last week.

Foreign investors who have net sold rupee debt of $4.7 billion over 18 sessions and are also selling in the equity market to make a profit are hammering the rupee.

Earlier during the day, the rupee hit a low of 58.98 a dollar amidst heavy dollar buying by oil refiners, state-run banks for likely defence-related purchases as also from a large corporate, dealers said.

Dealers said the Reserve Bank of India (RBI) did not intervene in the market to prop up the rupee.

In the forward market, the one-month offshore non-deliverable contract was at 59.17, while the three-month was at 59.78.

In the currency futures market, the near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange closed around 58.88. The total traded volume was $7.6 billion.

The rupee's weakness is also due to the country's record current account deficit, which is now past the record 6.7 per cent of GDP hit last fiscal.

The rupee is especially vulnerable to the scaling back of the US Federal Reserve's monetary stimulus as the market is pinning hopes on foreign currency inflows to liquidate the CAD.

Dealers said any signal that the US Fed will start scaling back efforts to keep interest rates low would likely result in a shift of funds out of India (See: Global investors pull out record funds from emerging markets).