Rupee falls below 51 mark for first time

The turbulent foreign exchange market was rocked by the sliding rupee for the fifth day in a row. The currency plunged below the 51-mark....

Written by ENS Economic Bureau | Mumbai | Published: February 28, 2009 1:28:56 am

The turbulent foreign exchange market was rocked by the sliding rupee for the fifth day in a row. The currency plunged below the 51-mark for the first time ever to close at 51.12 against the dollar,down over 66 paise in a day on sustained strong demand for the US dollar from foreign banks and oil importers with the weak GDP growth adding fuel to the fire.

Dealers said the stronger dollar abroad gave an opportunity to the foreign banks to buy American currency in the local market and sell it in the offshore non-deliverable forward contracts for immediate profits. In the overseas market,the dollar gained against its major rival euro but slipped against Asian competitor yen.

The fall was not restricted to the rupee alone. Even Asian currencies tumbled across the board on Friday on concerns over the region’s grim economic outlook,with the South Korean won tumbling to an 11-year trough.

The rupee had on Thursday set a fresh low record of 50.46 on sudden surge in demand for dollar. The previous low record of the domestic currency was recorded on last December 2 when it touched the intra-day high of 50.60. With today’s fall of 66 paise,the rupee had slumped by a whopping 151 paise or 3.04 per cent in the straight past five sessions.

According to market circles,continued selling by foreign investors in equity markets also weighed against the rupee. They have pulled out nearly $1.6 billion in the current calender year so far. Weakness in equity markets also put pressure on domestic unit. Strong month-end demand from oil importers to meet their monthly requirements was also a major reason for the rupee’s weakness,they said. Hit by the global economic meltdown,the economy has clocked slowest quarterly growth in over five years at 5.3 per cent in October-December period.

Meanwhile,posting its second monthly drop,stock markets fell 0.7 per cent on Friday as grim data indicated the global financial crisis was damaging the domestic economy more than expected. The Sensex fell 63 points to 8,891.61,its lowest close since Feb 24. The BSE index had been down as much as 2.5 per cent before pulling back on the rate cut hopes. The benchmark rose 0.6 per cent on the week. However,ITshed 5.7 per cent on the month,taking losses this year to 7.8 per cent.

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