Rupee sinks to 20-month low

Mumbai, May 8:  

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The rupee breached the 64 to the dollar mark on Thursday to close at 64.23, a 20-month-low. The currency hit a new low because of the continued sell-off of Indian equity and debt by foreign investors on uncertainty surrounding the applicability of the minimum alternate tax and the progress of key economic reforms.

Besides, the rising crude oil prices, the strengthening of the Euro, the weakness of the Korean won and Thai baht weighed on the domestic unit.

On Thursday, the rupee lost 70 paise over the previous close of 63.54. The domestic currency has dropped a little over 100 paise in the last five trading sessions.

The Indian unit opened at 63.75 per dollar. Intraday, it hit a low of 64.28 and a high of 63.69.

A dealer with a public sector bank said that if the government does not push through key economic reforms, the rupee could depreciate further. While this will make exports lucrative, imports will turn costly. NS Venkatesh, Executive Director & CFO, IDBI Bank, termed the rupee’s movement as a knee-jerk reaction to profit-booking by foreign institutional investors in both the equity and debt markets. 

He observed that the rupee has been supported by capital flows and not trade flows. It is expected to trade in the 64.10-64.35 per dollar band tomorrow and settle around the 63.50 level next week.

The benchmark BSE Sensex closed at 26,599.11, down 0.44 per cent (or 118.26 points) over the previous close. On Wednesday, the equity index had crashed 723 points (or 2.63 per cent).