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Mumbai: India's rupee dived to a five-year low on Monday as weak local and global stocks and month-end dollar demand from oil firms dragged heavily while intervention by state-run banks offered little respite.
The partly convertible rupee ended at 46.95/96 per dollar, off an intraday trough of 47.11, which was its lowest since June 2, 2003, and 0.9 per cent weaker than 46.545/555 at close on Friday.
"Since tomorrow is a holiday, the spill-over of the month-end dollar demand from commercial banks and a negative stock market ... pushed it below the psychological [47 to a dollar] level," said U. Venkataraman, head of treasury at IDBI Bank.
"We saw sporadic presence of state-run banks selling dollars but the demand was too high," he added.
The currency and bond markets will be shut today for half yearly book-closing of banks.
World stocks lost heavily yesterday, led by sharp falls in Europe as three European banks became the latest casualties of spreading credit woes, forcing partial nationalisations and overshadowing Washington's bailout plan.
Indian shares fell to an 18-month low before trimming their losses to end down 3.9 per cent, as fears grew about the spreading global financial crisis would see more foreigners repatriate their investments. Foreigners have sold a net $9.3 billion (Dh34 billion) of Indian shares so far in 2008, after buying a record $17.4 billion last year.
Dealers said state-run banks were likely to have sold more than $1 billion to help the rupee recover from the day's lows.
Under pressure
The rupee has been under pressure in recent sessions from heavy dollar demand from oil firms and importers scrambling to meet month-end import commitments. Refiners are the largest buyers of dollars in the domestic currency market. India imports about 70 per cent of its crude needs. Oil was trading below $103 per barrel.
See also Pages 44 & 52
Brewing trouble: Pakistani rupee ends flat
The Pakistani rupee ended flat on Monday in dull trade and dealers said the currency could weaken today as there were many import payments.
Dealers said the rupee closed at 78.10/20 to the dollar compared with Saturday's close of 78.15/20.
"There are some major payments due tomorrow so we could possibly see some pressure on the rupee," said a currency dealer. Dealers said there were some oil and wheat payments due before the end of the month and before a holiday for the end of Ramadan.
- Reuters
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