Mumbai: In line with weak stocks, rupee on Wednesday fell below 61-mark against dollar and ended at a four-week low of 60.95, down 35 paise, on growing concern that US hiking interest rates sooner-than-expected will hit inflows.
Continued dollar demand from importers and some banks too weighed on the rupee value that intra-day hit a low of 61.04, said forex brokers.
Fears rose that US Federal Reserve might raise interest rates earlier than expected on improving economic data, compelling foreign investors to cut back on exposure to emerging markets, including India, they added.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed bearish at 60.80 a dollar from previous close of 60.60. It attempted to reverse the track and soon touched a high of 60.75.
The rupee, however, again fell back sharply and hit a low of 61.04 - a level not seen since August 14 when it logged a low of 61.13. It finally settled at 60.95, a net fall of 35 paise or 0.58 per cent.
The 35 paise drop is the local currency's worst single day loss since 65 paise fall on August 6. on Tuesday, it plunged by 31 paise or 0.51 per cent.
The benchmark S&P BSE Sensex on Wednesday dropped by 207.91 points, or 0.76 per cent. FPIs/FIIs had bought shares worth USD 89.50 millio on Tuesday, as per provisional data. The dollar index, against six major rivals, showed hardly any change in overseas market Wednesday.
Pramit Brahmbhatt, Veracity Group CEO, said: "Indian Rupee lost over half a per cent taking cues from strong dollar which is already at elevated levels against global peers."
Anindya Banerjee, currency analyst, Kotak Securities, said unwinding of offshore-onshore spreads may have also played a role in the recent rupee fall.
"Over past couple of sessions, the surge in Dollar/Rupee has occurred on the back of narrowing of the spreads between onshore and offshore traded Rupee forwards. At the same time, exchange traded futures have witnessed a sharp fall in their open interest positions," Banerjee said.
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