Rupee opened sharply lower on Thursday dragged down by poor equities and a surge in the US dollar against the euro yesterday as investors were seen shunning off risky asset and a flight to quality sentiment strengthened the greenback. Meanwhile, the domestic industrial production data came at a 7.1% for the month of June, as compared to an 11.52% in the previous month further aggravating domestic investors concerns about India's growth story. The domestic currency commenced at a near 2 week's low at Rs. 46.97 per dollar and weakened further to cross the 47 per dollar mark during intra day moves.
The key benchmark indices cut losses in morning trade as Asian stocks and US index futures recovered from initial sharp losses. The barometer index BSE Sensex flirted with the psychological 18,000 mark after falling below that level in early trade. The Sensex was down 71.51 points or 0.4%, up close to 85 points from the day's low.
The US dollar steadied since early Asian trade after scoring its biggest gain in nearly two years as investors looked for safer assets as a gloomy US economic growth outlook and weak Chinese data suggested global growth was faltering. The greenback was under steady pressure over the last six weeks as weak US economic reports added fears that economic growth was slowing. The euro dropped down below its key 1.30 levels yesterday to 1.28 and steadied at the 1.29 levels so far today. The Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was down almost 0.02% at 82.27. However, the Japanese yen continued to hover near a 15-year high, as investors looked to lower-risk assets.
Spot rupee opened lower on Thursday by around 26 paise at 46.97 and registered an intra day low, breaching the 47 per dollar mark at 47.05. The partially convertible currency hit an intra day high at 46.82, as per data from CCIL. Rupee was last seen trading at 46.92 at 11.35 AM IST, down around 21 paise or 0.45% as compared to the previous closing price at 46.71.
One-month offshore non-deliverable forward contracts were weaker than the onshore spot rate. In the domestic currency futures market on the NSE, the front month August contract opened on Thursday at 47 per dollar, hitting an intra day high at 47.14 and registering a low at around 46.95 so far during the day. Rupee was last seen trading at 47.02, down around 21 paise or 0.45% as compared to the previous close at 46.81. The contract will likely find an intra day support at 46.95.
In the domestic bond market, the yield on 10-year benchmark federal paper, 7.80% GS 2020, fell 1 bps to 7.80% at 11.30 AM IST, compared to 7.81% at close in the previous trading session. Meanwhile, the yield on another major paper, 8.13% GS 2022, plunged 5 bps to 7.95%. The yields tumbled tracking sharp fall in US treasury yield, as investors around the world sought US debt in response to the Federal Reserve's new asset plan and its weak outlook for the US economy.
Meanwhile, in commodities, light sweet crude oil for September delivery was down 44 cents to US$ 77.58 on the GLOBEX division of New York mercantile exchange.