Rupee drops 44 paise to 10-week closing low of 63.10 vs dollar

Succumbing to a rout in emerging markets, the rupee slipped past the 63-mark for the first time in ten weeks today and closed 44 paise lower at 63.10 versus the dollar amid fears that further stimulus tapering by the US central bank will hit capital inflows.
Nervous local stocks ahead of the RBI policy meet, month-end dollar demand from oil refiners and reports of Argentina abandoning support of its peso on the open market, also weighed on the rupee, which slumped for the sixth day in seven.
At the Interbank Foreign Exchange (Forex) market, the rupee commenced the day on a sluggish note at 62.84 a dollar from last Friday's close of 62.66.

Even as the sell-off in other emerging market currencies deepened, the rupee tried to recover and logged a high of 62.65 after the government said there is no need to worry as "economic fundamentals" are very strong.
However, the rise proved to be short-lived as the rupee fell back sharply to a low of 63.32. It concluded at 63.10, a net fall of 44 paise or 0.70 per cent. This is its weakest closing level since 63.11 against dollar on November 14, 2013.
In straight three sessions, it has slumped by 129 paise or 2.09 per cent.

"The emerging markets currency sell-off is causing a contagion effect as investors pulled money from emerging markets and other assets viewed as risky, thereby pushing rupee down," said Sugandha Sachdeva of Religare Securities.

In addition to this, the fear that Federal Reserve might go ahead with withdrawing its monetary stimulus by another USD 10 billion added to the pressure, said Abhishek Goenka, CEO, India Forex Advisors.
The dollar index recouped its initial losses and was trading almost stable against a basket of six major rivals ahead of a US report on new-home sales.
Meanwhile, the BSE Sensex today tanked by over 426 points, or 2.02 per cent, to end at a 3-week low of 20,707.45. FIIs pulled out USD 31.45 million on Friday, as per Sebi data.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The rupee continued to depreciate ahead of the central bank's policy review. The trading range for the spot USD/INR pair is expected to be within 62.80 to 63.80.