Indian Rupee closes at 8-year low against dollar

by Sanjay Jha | October 21, 2008 at 03:08 am

73 views | 0 Recommendations | 0 comments

Indian stock market climbed today on global cues. In the meantime India's rupee rose for the first time in four days on speculation steps by governments in Asia and Europe to bolster capital will spur demand for local assets. The rupee is likely to to fall to a record level low of 50 per dollar.

The rupee on Monday plunged to 49-mark, its lowest closing level in eight years, against the American currency on fresh dollar demand from ba nks amid a surge in stock markets in Asia and Europe.

The earlier low level of the domestic currency was on June 18, 2002 when it closed at 48.99/49.00 a dollar

Forex dealers said the rupee surged against dollar in early trade on expectations of capital inflows. Central bank's surprise cut in repo rate by one per cent also aided the rupee sentiment, they said.

The local unit also drew support from a remarkable surge in stocks across Asian and Europe.

The benchmark Sensex rose by over 450 points at mid-session but pared some loses to end the day higher by 248 points or 2.48 per cent. Asian indices also ended up by about 2.0 to 5.0 per cent.

However, rupee's surge was short-lived because suddenly during the day banks started buying dollar heavily, suspected to be on behalf of the defence sector.

In volatile trade at the Interbank Foreign Exchange (forex) market, the Indian unit moved in a range of 48.70 and 49.10 during the day after resuming higher at 48.74/77 a dollar from its previous close of 48.88/89 a dollar.

Meanwhile, the Reserve Bank of India slashed the repo rate by one per cent in the pre-afternoon trading.