The bearish trend in the domestic stock market and the arbitrage opportunity between the domestic and the overseas markets resulted the rupee breaching the 50-mark against the US dollar for the first time in over two months.
While the rupee opened marginally weaker at 49.70 against yesterday’s close of 49.67 against the greenback, it fell to a low of 50.07 in the afternoon. This was the lowest level since December 12, according to Bloomberg data.
Later in the day, the rupee recovered a little due to the Reserve Bank of India’s intervention and the sale of dollars by some corporate houses to close at 49.98, the lowest closing level in 2009.
Most currencies fell against the US dollar as the unrest in global markets shook sentiments. Among the Asian currencies, the Taiwanese dollar hit a five-year low against the dollar, while the South Korean won fell to its lowest level in two months and the Malaysian ringgit declined to the lowest since November 2006.
While the rupee’s fall was triggered by the bearish sentiment in the stock markets, the arbitrage in the offshore non-deliverable forwards put pressure on spot rates. According to NewsWire 18 data, the one-month NDF rate was 50.32 per dollar, which created an arbitrage opportunity between onshore and offshore markets.
Source : Business Standard