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Rupee ends at record closing low of 215.5 to KD
August 2, 2013, 2:51 pm

The Indian rupee fell sharply on Friday to close at 61.10 against the U.S. dollar. This is the lowest ever close for the currency, which had fallen to as low as 61.17 in intraday trade against Thursday's close of 60.43/44.

The rupee is still not far from the record low of 61.21 hit on July 8. The Reserve Bank of India likely sold dollars via local banks to pull rupee off near-record lows, four dealers told Reuters. State-run banks likely sold dollars from 61.17 rupee levels, dealers said.

Friday's weakness came on account of strong U.S. data, which raised the prospects of the Federal Reserve beginning to taper its monetary stimulus this year. Any tapering will exacerbate the exodus of foreign funds from India, analysts said.

Demand from oil importers lurked in the market and a large private bank was buying dollars, dealers told Reuters. Weakness in equity markets, which closed lower for the eighth straight day on Friday, also weighed on sentiments.

The rupee had staged a strong rebound from intra-day lows on Thursday as the Reserve Bank of India continued to bolster its currency defence by tightening rules for curbing speculation by foreign investors, and on rumoured central bank intervention.

The RBI stipulated on Thursday that foreign institutional investors would require a mandate from participatory note holders to hedge on their behalf.

Participatory notes are by far the most popular derivative instrument by which offshore investors can invest in the domestic stock market without revealing their identity. The central bank notification led to large dollar selling by foreign banks.

The RBI also continued its strategy of intervening via state-run banks to support the currency, several traders said.

The government further eased rules for entry into multi-brand retail on Thursday. It will sell stake in three companies via share auction on Friday. The government expects to raise a combined $58 million from the sale.

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