The rupee dropped on Monday to its weakest level against the dollar in more than a month and half, tracking a bout of global risk aversion ahead of US elections and a key Greek parliamentary vote on austerity.
The 1.47 percent fall in the rupee almost matched the 1.5 percent fall on October 8, as the local currency tracked the drop in the euro to a near two month low on the renewed uncertainty about the euro zone's debt crisis as Greek lawmakers are due to vote on reforms on Wednesday.
Choppy domestic shares also added to the downward pressure on the rupee. The Sensex ended up 0.04 percent, with defensive stocks gaining on caution ahead of the US election on Tuesday.
"The outlook for USD still bullish ahead of US elections and we could see USD touching levels of 55.60 or 55.85 in the medium term," he added.
The partially convertible rupee closed at 54.60/61 p er dollar after falling to 54.65 during the session, its weakest since September 14. The rupee closed at 53.8050/8150 on Friday.
In the offshore non-deliverable forwards market, the one-month contract was at 54.96 w hile the three-month was at 55.53.
Traders say stop-losses were triggered after the USD/INR pair breached the 54.20 mark, leading to heavy buying.
Corporate dollar purchases also hit the local unit: a large iron ore refiner had bought around $200 million from the market in the first half of the session, traders said.
In the currency futures market, the most-traded near-term dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 54.93 wi t h a total traded volume of around $6.6 billion.
Copyright @ Thomson Reuters 2012