Rs loses 555 paise in just 3 days [DNA : Daily News & Analysis (India)]
(DNA : Daily News & Analysis (India) Via Acquire Media NewsEdge) Mumbai: The rupee crossed two psychological levels of 67 and 68 on Wednesday before closing just 20 paise shy of the next level - 69 to a dollar.
The Indian currency lost 555 paise against the greenback in a span of just three days.
In the pre-crisis period, it typically took 2-3 years for such a drop to take place.
On Wednesday, the rupee closed at a fresh all-time low of 68.80 per dollar, 256 paise, or around 4%, lower than the previous close. This is the biggest single day fall in two decades.
The rupee continued to slide lower throughout the trading session despite heavy intervention by the Reserve Bank of India (RBI) earlier in the day. Traders said there was huge dollar demand from oil marketing companies and the foreign banks buying on behalf of foreign institutional investors (FIIs).
"Dollar supply from RBI was not enough to meet this kind of demand," said a forex dealer.
In order to address the problem, the RBI announced a special forex swap window for the three oil marketing companies - Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.
The RBI will undertake sell or buy dollar-rupee forex swaps for fixed tenor with these oil marketing companies through a designated bank, the central bank said in a release after market hours.
That way, the daily dollar demand of these companies, estimated at $400-500 million, would shift from the spot market and RBI's intervention would get channelled towards genuine need for the greenback.
"The swap facility gets operationalised with immediate effect and will remain in place until further notice," the RBI said.
While the measure should help rupee recover some losses on Thursday, there are concerns of a spillover from the non-deliverable forwards markets abroad. The rupee had already crossed 69 per dollar levels in the NDF markets on Wednesday.
NDFs are contracts settled in dollars and the market is outside the purview of Indian regulators.
FII outflows continued as international rating agencies flagged concerns on the impact of the US Fed stimulus tapering on emerging economies.
As per BSE, FIIs net-sold Rs1,120 crore from Indian equity markets on Wednesday.
The debt markets also witnessed sell-off, as indicated by a jump of 18 basis points in the 10-year benchmark government bond yield, which closed at 8.96% after having crossed 9% level in intraday trade.
The dollar index, as measured against six major currencies of the world, jumped to 81.40 levels from 81.17 a day ago. The rupee was the worst performing Asian currency of the day.
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