Mumbai: Extending losses for the fourth straight session, the rupee Tuesday plunged by 32 paise to close at nearly 2-month low of 64.19 per dollar on persistent demand for the American currency from banks and importers on the back of higher greenback overseas.
A massive rout in currency and financial markets worldwide spooked by Chinese central bank's policy move along side heightened concerns about capital outflows in the face of imminent US interest rate hike predominantly weighed on the local currency, a forex dealer said.
The dollar soared during the Asian session following the shocking action by the Chinese central bank even as Greek reached a deal on a third bail-out package with its creditors.
The rupee resumed substantially lower at 64.16 per dollar from overnight closing level of 63.87 at the Interbank Foreign Exchange (Forex) Market and dropped further to 64.28 before ending nearly 2-month low at 64.19, showing a loss of 32 paise or 0.50 percent.
The rupee had last ended at 64.26 per dollar on June 16, 2015.
The rupee has dropped by 45 paise or 0.71 percent in five trading days.
The domestic currency moved in a range of 64.03 and 64.28 per dollar during the day.
The People's Bank of China allowed the yuan to depreciate almost 2 percent against the US dollar to levels last seen three years ago.
The ripple effect of renminbi's sharp depreciation pressure was felt in the currency markets across the region and lost ground to the strengthening US dollar as traders weighed the implications of the surprise move by the People's Bank of China (PBOC) amid weakening exports and slowing economic growth.
The "currency war" unleashed by China also sent shock waves through financial markets in Asia and Europe.
The US dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up 0.02 percent in the early trade.
Meanwhile, the flagship benchmark sensex tumbled over 235.63 points, or 0.84 percent to close at 27,866.09.
Pramit Brahmbhatt, Veracity Group CEO, said, "The rupee depreciated over half percent for the day as China devalued its currency Yuan leaving other currencies in a tight spot against the dollar."
Local equities also traded weak which further dented the rupee movement and forced it to shed almost thirty-two paise for the day to close at 64.19.
The trading range for the Spot USD/INR pair is expected to be within 63.80 to 64.60.
In the forward market, the premium for dollar continued to decline on persistent receivings from exporters.
The benchmark six-month premium payable in January declined further to 205.5-207 paise from 208-210 paise yesterday and far-forward contracts maturing in July 2016 also fell further to 431-432 paise from 433-435 paise.
The RBI fixed the reference rate for the dollar at 64.17 and for the Euro at 70.3495.
The rupee tumbled against the pound sterling to close at 100.01 from 97.06 yesterday and moved down further against the Euro to 70.84 from 69.94.
The domestic currency dropped further against the Japanese currency to 51.39 per 100 yen from 51.26 previously.
