The rupee weakened by 27 paise to trade at six-week low of 60.45 against the US dollar in early trade today at the Interbank Foreign Exchange market on high demand for the American currency from importers.
Chinese shares opened lower, with the Shanghai Composite Index down 1.8% and the CSI300 index down 2.2%.
Reacting to market specific developments, the domestic unit touched a low of 66.74 in intra-day trade before concluding at 66.65.
Sensex gains 2.4%, Nifty crosses 7,000; investors feel exit polls have vindicated their stand
Tracking a recovery in local shares, the Indian rupee on Friday snapped a two-day declining trend and bounced back by 39 paise to end at 61.44 against the Greenback on fresh dollar selling by exporters and some banks.
RBI would get the comfort of meeting its 8 per cent January Consumer Price Index-based inflation target, BofA-ML said, adding that 'we expect the RBI to cut 75 bp in 2015 from February with inflation on course to 6 per cent in January 2016'.
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Sentiments turned buoyant after RBI on Monday cut the marginal standing facility rate, at which it lends emergency funds to banks, by 0.5 per cent to 9 per cent with an aim to improve liquidity and boost economic activities.
RBI governor Raghuram Rajan, on Monday, said the current level of the rupee is "pretty reasonable" and any attempt to devalue it may lead to a surge in inflationary pressures and "offset any benefits"
The huge pressure on the currency market largely went unnoticed because of the demonetisation exercise.
The combined 10 Asian currencies have appreciated by 6.6%.
The dollar gained strength with the emergence of the US as the only developed economy showing signs of recovery.
Possible slowdown of FII money into debt and equity markets could add pressure on currency.
The rupee dropped on renewed demand for the American currency.
The rupee had dipped by a massive 67 paise to an all-time closing low of 61.10 against the dollar on Friday.
Exchange-traded currency futures volume down 80% since Jun
The rupee closed at Rs 66.21 in its last trading session.
Month end dollar demand from oil importers has forced rupee to trade weak.
RBI is unlikely to stem the slide against the dollar as the greenback is rising rapidly against all currencies in the world.
Asian shares ended higher after a string of positive US economic data.
Asian stocks sagged on Monday, with risk sentiment dampened as Shanghai shares wobbled after the Chinese markets resumed trading following a four-day long weekend.
The breadth was neutral with 1,329 advances and 1,320 declines.
The silver lining is that a pick-up in the US economy could help emerging market exports.
The rupee is likely to strengthen to 60-61 level by this fiscal-end on expectations of improvement in current account deficit (CAD) and higher inflows from overseas investors.
Rupee is seen to remain in the range of 67.50-68.80 in the short-term
Decline in the rupee coupled with a slide in the crude oil prices have dented the sentiments.
Sun Pharma was the top gainer after SPARC received Sebi nod to raise up to Rs.250 crore through a rights issue
The 30-share Sensex ended down 604 points at 28,845 and the 50-share Nifty ended down 181 points at 8,757. The Bank Nifty ended down 602 points at 19,146.
A weaker rupee might stimulate Indian exports and nullify some of the effects of Chinese devaluation.
On the sectoral front, rate-sensitive sectors such as Bankex and Auto gained by 1% and 0.7% respectively while BSE Consumer Durables gained 1.4%.
The 30-share Sensex ended lower by 46 points at 27,842 and the 50-share Nifty slipped 17 points to trade at 8,378.
The large current account deficit and the growing vulnerability on the external front have largely contributed towards the secular decline and the current volatility of the rupee.
The world seems to have caught severe pneumonia, or worse, as China had flu.
Market breadth continued to remain strong, with 1899 gainers and 674 losers on the BSEs.
November IIP data show a fall of over 20%, led by automobiles, gems & jewellery and home appliances; turnaround seen as unlikely.
There's surplus liquidity and RBI, with plentiful forex reserves, is ready to pump whatever extra is needed
Broad-based buying aided sentiment and the market registers record turnover at Rs 6.86 lakh crore
Experts caution against tough times in Indian equity markets in 2015.
According to Merrill Lynch (BofA-ML) report, Domestic capital markets are likely to remain volatile in the September-November period due to factors like US Fed's policy action, second quarter corporate earnings and Bihar state elections.
To be sure, this is not some stunning new revelation that our equity markets are beholden to foreign flows.
The fall in reserves was due to a sharp fall in foreign currency assets.
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