Rupee Posts Worst Daily Fall In 15 Months; Greek Default Looms.

MUMBAI: The Indian rupee posted its biggest single-day fall in more than 15 months on Monday as heightened fears over a likely Greek debt default triggered a flight to safe-haven dollar, while a slump in July's local industrial output data also weighed.

Analysts and traders believe the rupee could weaken beyond 47.70 in coming days if negative newsflow continues from global markets, prompting foreign fund outflows from local shares.

The partially convertible rupee ended at 47.22/23 to a dollar, 1.5 per cent weaker on the day to log its biggest single day fall since June 1, 2010, after touching a low of 47.23, a level not seen since July 22, 2010.

The rupee had closed at 46.56/57 last Friday. "Real concern in the market is morphosis of a Europe-centric issue into a problem with repercussion on global growth. Risk aversion is spreading through asset classes and the dollar is the only safe haven left out there," said Jonathan Cavenagh, a senior foreign exchange strategist at Westpac Institutional Bank in Singapore.

A spokesman for the German Chancellor on Monday said Angela Merkel strongly agrees with her Economy Minister Philipp Roesler that an orderly bankruptcy of Greece was no longer taboo.

Greece, meanwhile, confirmed on Monday that the country has cash for only a few more weeks.

The euro was at $1.3623 at the end of the rupee trade, sharply lower from $1.3807 on Friday, while the index of the dollar against six major currencies was at 77.264 points from 76.614 points previously.

Intraday, exporter-lead dollar selling offered only a temporary reprieve for the rupee, dealers said.

The selling pressure on the local unit intensified after domestic equities fell further after government data showed India's July industrial output growth slumped to a two-year low.

Indian shares dropped to a two-week closing low, their second straight session of fall, in a broad sell-off as growing fears of a Greek default hit world markets and as investors braced for a possible local rate increase this week.

Foreign funds have so far in the month bought $466 million of local shares, after having sold over $2.2 billion in August.

The one-month onshore forward premium was 16.50 points from 18 points on Friday, the three-month was at 44 points from 49 and the one-year was at 114.50 points from 139.25.

One-month offshore non-deliverable forward contracts were quoted at 47.45, weaker than the onshore spot rate.

In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange and the United Stock Exchange both ended at 47.3350, while on the MCX-SX it closed at 47.3250. The total volume was $8.23 billion.

Source: economictimes.indiatimes.com