Rupee at a 3-month low

The rupee saw its steepest drop in three months over demand from oil companies and concern that exit of foreign institutional investors from equity markets could see an outflow of dollars. The rupee closed at 51.22, down 56 paise from Wednesday’s close of 50.66. A sharp fall in the value of the rupee would increase pressure on the government to hike fuel prices. The rupee mirrored the fall in the sensex, which declined 2.3% following a series of bad news. The rupee opened weak at 50.75 and plunged to an intraday low of 51.27 before recovering marginally to close at 51.22. After a smart recovery in January, the rupee has fallen by 4.3% against the dollar in March, which makes it the worst performing Asian currency for the month. In the offshore market, three-month non-deliverable forwards were traded at 52.44 on Thursday, down from 51.68 on Wednesday. Since the rupee is not fully convertible offshore contracts are settled in dollars without delivery of the rupee.