 "rupee, dollar, currency")
The Reserve Bank of India started intervening in the currency markets after the rupee lost more than 1% in opening trade on early trends that Britain would leave the European Union following a nationwide referendum.
The rupee opened at 67.88 a dollar, from its previous close of 67.25 a dollar, but fell to 68 a dollar within a few minutes of opening trade, only a short distance from its lifetime low of 68.85 a dollar reached on August 28, 2013.
The Reserve Bank of India (RBI) started making heavy interventions when the rupee crossed 68.20 level, forcing the local currency to retreat from its day’s low of 68.2150 to 68.15 a dollar level by 9.25 a.m., according to dealers. Some exporters have also started selling dollars in the market, taking advantage of the rupee level.
India's central bank had earlier communicated that it was prepared to face Brexit related volatility in the market and it has enough reserves to take care of any undue spike.
Brexit in the long run is good for India, said State Bank of India chief economist Soumya Kanti Ghosh.
“India’s trade with EU and Britain both will rise. England is perhaps the only country that has a dedicated minister to look only after India-Britain trade, this indicates that UK was anticipating Brexit and made preparations for increasing trade with India. This will be good for the rupee in the long run,” Ghosh said.
The 10-year bond yield fell to 7.48% from its opening level of 7.50% on Brexit development. In volatile times, investors move to fixed income securities, making the prices of bonds rise and yields fall.
Sensex, the benchmark equity index of the Bombay Stock Exchange, was down almost 1,000 points, or about 3.5%.
The dollar index, which measures the US currency’s strength against global major currencies, zoomed to 96.14, up 3.14%. All Asian currencies are down, too.
South Korean won was down nearly 2%, followed by Singapore dollar 1.7% and Malaysian ringgit, which were down 1.7% and 1.5% respectively. The Japanese yen was a standout, higher by 4.4%.
The British pound fell 10% to a more than three-decades low of below $1.37, while the yen was at a decadal high against the British currency as investors piled on to its safe haven.
Minister of State for Finance Jayant Sinha told Indian TV channels that India is focusing on the market dislocations caused by Brexit, but that it was too early to asses the impact on trade.
"There's going to be market dislocation and we are going to have to focus on that," Sinha said.
