Rupee falls most in 2 weeks as investors seek safety

The rupee slid for the third time in four days as Japan’s earthquake and nuclear accident prompted investors to favor the relative safety of the dollar over regional assets.

The currency weakened as the Bombay Stock Exchange’s Sensitive Index of local shares dropped 1.5 per cent, the biggest loss since February 24. The Dollar Index, which tracks the greenback against the currencies of six major US trading partners, climbed 0.7 per cent as Japan’s Prime Minister Naoto Kan said the risk of further radiation leaks is increasing after a third explosion rocked the Fukushima Dai-Ichi nuclear power plant north of Tokyo.

The rupee dropped 0.3 per cent to 45.245 per dollar at the 5 pm close in Mumbai, according to data compiled by Bloomberg. The rupee may fall to 45.45 this week, Babu predicted.

Bonds gain
11-year bonds gained for the first time in three days on speculation a slide in oil costs stemming from Japan’s earthquake would help tame inflation, boosting the attraction of fixed-income assets.

Crude slid 3.5 per cent to $97.67 a barrel as the world’s third-largest economy grappled with the aftermath of a March 11 temblor, the largest recorded in the country. India imports more than 75 per cent of the oil it uses and Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said on Tuesday inflation may slow to 7.5 per cent by the end of March from 8.31 per cent in February.

The yield on the 8.08 per cent bond due August 2022 fell two basis points to 8.08 per cent as of the 5 pm close in Mumbai, according to the central bank’s trading system. A basis point is 0.01 percentage point.