Rupee slumps to record low of 59.94/dollar

Trading of bonds halted for an hour; FM holds meet with top civil servants

The rupee weakened against the dollar in early trades on Thursday on the back of Federal Open Market Committee (FOMC) chairman Ben Bernanke’s statements that he would start withdrawing the bond purchases programme knows as Quantitative Easing 3 (QE3) in 2013.

At 10:45am the rupee was trading at Rs 59.61 compared with previous close of Rs 58.72. It opened at Rs 59.70 and has already hit a low of Rs 59.94 so far.

The street is expecting the rupee to breach the Rs 60 per dollar mark today.

“Rupee could breach Rs 60.00 per dollar levels today on back of FOMC chairman's Bernanke statements that he would start withdrawing bond purchases as early as fourth quarter of 2013. The dollar gained while global equities and commodities crashed. The spillover is expected to be seen in the Indian markets today. The markets will be keenly watching for Reserve Bank of India's intervention,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.

The decision to pull back QE3 is on the back of the US economy showing signs of improvement.

Pramit Brahmbhatt, chief executive officer at Alpari Forex (India) expect the rupee to trade in the range of Rs 59.50-60.25 per dollar during the day.

Meanwhile, Finance Minister P Chidambaram held a meeting with his top civil servants about the fall of the rupee.

Chief economic adviser Raghuram Rajan said that regulators are watching the situation with rupee closely.

The benchmark 10-year bond yield rose 8 basis points (bps) at 7.348% from previous day's close of 7.263%. The yield moved in the range between 7.3456% and 7.363%.

The BSE Sensex and the Nifty fell more than 2% each.

Yesterday, the rupee had eased slightly. But outflows from the equity markets added to concerns about the funding of the current account deficit.

The weakening of the rupee also resulted in halt of trading of bonds for almost an hour. The trading began again at 10:40 am.