Rupee weakens past 68 per US dollar, Sensex falls over 950 points on Brexit fears.

Mumbai: The Indian rupee weakened past the 68 mark, while the Sensex fell over 950 points in pre-opening markets on Friday after preliminary results show that Britain may leave the European Union (EU).

At 9.14am, the local currency fell to 68.18 against the US dollar, down 1.36%, its steepest fall since 11 November 2013, from 67.25 per dollar on Thursday. The rupee opened at 67.90 and touched a low of 68.18, a level last seen on 1 March.

India’s benchmark Sensex index fell 3% or 950 points to 26,050. So far this year, Sensex is up 0.5%. Year-to-date, foreign institutional investors (FIIs) have bought $2.81 billion from the local equity market.

Meanwhile, India’s 10-year bond yield was trading at 7.480%, compared with Thursday’s close of 7.481%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.088, up 2.7% from its previous close of 93.529.

In a referendum that asked Britons to vote whether their country should remain within the EU or leave, 51% voted for an exit, early results of 244 provinces out of the total 382 showed, according to the BBC.

The results have taken global markets by surprise as various surveys had indicated that the vote would be in favour of remaining within the EU. Equities and currencies had been gaining over the past three days on indications that Britain would vote to remain within the EU. The pound sterling had gained over 2% on such hopes and global equities had also risen.

As results indicated a Brexit, the pound tumbled more than 7% to touch its lowest level since 1985 and currencies from Japanese yen to Malaysian ringgit dropped nearly 1%.

Asian currencies fell against the US dollar, South Korean won was down 1.9%, Singapore dollar 1.7%, Malaysian ringgit 1.5%, Indonesian rupiah 1.2%, Thai Baht 0.9%, Philippines peso 0.9%, Taiwan dollar 0.8%, China offshore spot 0.6% and China renminbi 0.32%. However, Japanese yen was up 4.41%.

Currency dealers said that although the rupee is widely expected to weaken gradually, Brexit has exacerbated the fall. Further, the drop to its all-time lows of 68.85 per dollar hit in August 2013 could now be faster, said one currency dealer.

The negative sentiment against the rupee was visible in the offshore non-deliverable forward (NDF) market where the one-month NDF rate dropped to 68.45 per dollar and the three-month rate fell to 69.14 moments before the domestic markets opened for trading.

“It is dollar all the way and all the major currencies are down. Brexit is unexpected and so we are going to see volatile period ahead. It will not only have repercussions for the currency but all markets globally,” said Ashutosh Raina, head of trading at HDFC Bank.

So far, the Reserve Bank of India (RBI) has not been seen intervening in the market, said two currency dealers, requesting anonymity.

On Wednesday, the RBI in a statement assured markets that “it is maintaining a close vigil on developments” and will take all necessary steps, including liquidity support, to ensure orderly conditions in the financial markets. Most analysts have been forecasting a fall in rupee if Britain decides to leave the EU.

Source : livemint.com