The rupee fell over 1 per cent to a new 10-1/2 month low of 62.94 as stocks declined and on speculation importers stepped up dollar purchases before the year end. The rupee was also hit by losses in emerging market currencies and domestic data on contraction in industrial output which sparked concerns about economic growth.
The Indonesian rupiah, meanwhile, hit a 16-year low amidst a slump in crude prices and worries about US rate hikes expected next year. This is the biggest single-day decline for the rupee since its 1.05 per cent fall on August 6.
According to dealers, the RBI stepped in to prevent more losses in the rupee. The RBI sold dollars at 62.70 to contain rupee’s rapid fall but the dollar demand was huge, said a dealer. “While one can expect the central bank to intervene regularly to halt the rupee’s fall, rupee could possibly weaken below the 63 level soon,” he said.
Domestic investors were spooked after data late on Friday showed India’s factory output contracted in October, its worst performance in three years.