Following the weakness in Asian markets and fund outflows by FIIs over the two weeks, the rupee fell 44 paise or 0.67 per cent on Thursday to close at 67.29, its weakest in over 28 months.
The weakness in rupee also put a pressure on the stock markets as experts said that a volatile rupee is a growing concern for the markets. The benchmark Sensex at the Bombay Stock Exchange came under pressure in the early trading hours and fell 381 points 1.5 per cent before recovering to close at 24,772.9 with a fall of 81 points or 0.3 per cent.
The rupee has been under pressure over the last fortnight and has lost over a hundred paise against the dollar and has slipped from a value of 66.21 to a dollar, to 67.29. The sharp decline on Thursday was led by an outflow of funds by FIIs.
According to the data available at BSE, the FIIs sold equities worth a net of Rs 1,221.9 crore. On September 3, 2013 the rupee closed at 67.64 against the dollar and Thursday’s closing is the weakest since then.
Currency experts say that the rupee is likely to further weaken from the current levels. “Our house view is that in the coming few months the rupee is expected to weaken to around 68.5 against the dollar. The pressure is on account of weakening equity markets and strengthening of dollar,” said Rajini Panicker, head of commodity research and strategy at Phillip Capital.
Some traders say that the near-term as slump in oil prices and volatility in China’s market will put pressure on the emerging market currencies.
There are, however, expectations in the market that RBI may intervene in order to provide some stability to rupee.
Even though it has lost some ground, rupee has been one of the better performers among its emerging market peers. While rupee has lost 1.6 per cent over the last fortnight, the Russian ruble and Mexican peso have lost 4.6 per cent and 4.3 per cent respectively. Even the South Korean won and Brazilian real have lost 3.9 per cent and 3.4 per cent respectively during the same period.
Last year, the rupee had come under significant pressure in August-September 2013 following a sharp rise in the current account deficit and FIIs pulling out of the Indian markets. While it hit a low of 68.81 against the dollar on August 28, 2013, it closed at 67.64 on September 3, 2013.