Mumbai: The Indian rupee on Wednesday touched a new two-year low of Rs.65.44 to a dollar during intra-day trade on the foreign exchange markets.
The rupee, however, later gained strength recovering to Rs.65.11 and closed the day`s trade at Rs.65.24 to a dollar.
Wednesday`s intra-day fall mirrors the currency`s movements on the off-shore markets on Tuesday -- where it had hit a fresh two-year low at Rs.65.47 to a US dollar.
The domestic interbank foreign exchange markets were closed on Tuesday on account of the Parsi New Year. The rupee`s previous close stood at Rs.65.32 to a dollar.
"The ripple effects of yesterday`s rupee position in the off-shore markets were seen in the domestic markets today. However, the rupee made a healthy come back and ended lower than the previous close," Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services told IANS.
The major catalyst for the rupee`s fall has been the devaluation of yuan, intended to boost Chinese exports.
China`s central bank devalued yuan by two percent on August 11. This was the biggest devaluation in the Chinese currency since 1994.
The currency fell again by another two percent on August 12 panicking the world economy.
The measure to devaluate the yuan is seen as an attempt to arrest the implosion in the Chinese markets.
The attempt is also view as a measure to corner the international export markets from other emerging trading powers such as India and the Asean (Association of Southeast Asian Nations) grouping.
The move has strengthened the dollar value, which has negatively impacted major world currencies including the Indian rupee.
The yuan has fallen by 4.6 percent till now since August 11.
The world markets are fearful of the fact that the $10 trillion dollar-worth Chinese economy has the ability to dump unlimited amount of goods and services, thereby cornering the entire international exports customers.
Analysts pointed out that the minutes of the last Federal Open Market Committee (FOMC) meet which will be released later today will be the next trigger for the rupee movement.
"The movements in the Chinese markets and the minutes of the FOMC will be watched closely," Anindya Banerjee, senior manager for currency derivatives with Kotak Securities, told IANS.
are rife that given the new scenario of yuan devaluation, stalled reforms, deficient monsoon and high interest rates, the RBI`s comfort range regarding rupee has moved up between Rs.64.20-Rs.65.30 per dollar.
The Reserve Bank which has been pretty active in the forward purchase markets since the last 22 months was earlier seen comfortable with the rupee ranging anywhere between Rs.63.20-Rs.64.30 per dollar.
At that time the central bank used to sell dollars -- whenever the rupee crossed the Rs.64-mark and buy when it fell below Rs.63.
