Rupee weakened over 8-month low of 56.01

Mumbai, May 24 – The rupee weakened sharply in the intra-day trade to touch an eight-and-a-half month low of 56.01 before closing at 55.59 in the interbank foreign exchange market on Thursday, down 11 paise from its previous close of 55.48.

 

The sharp drop took the market completely by surprise . Dealers said that they had been expecting a correction in the rupee after yesterday's fall as there were no major concerns on the external front.

 

 "The 40 paise gap opening was absolutely not warranted . Although the day began with the news of the Nikkei falling over 7%, the rupee has not always moved in line with stocks and in recent sessions had actually gained when the sensex had weakened ," said K N Dey, director, Basix Forex & Financial Solutions .

 

He added that the shortterm outlook for the rupee continued to be positive as oil and gold prices had softened and multi-billion dollar inflows were expected on account of Unilever's open offer for Hindustan Lever and Qatari Foundation's $1.26bn investment in Bharti Airtel.

 

Dealers said that only explanation for the fall was that there was general panic following the 7% fall in the Nikkei, which was coupled with the release of China's purchasing manager's index data which pointed at a slowdown and fears of US Fed withdrawing stimulus. TNN