Rupee drops sharply against US dollar

MUMBAI: The rupee on Friday dropped sharply to close at 40.51/53 against the US currency following crash in global equity markets on concerns over the US credit and housing markets.

According to forex dealers there was a rush to cover short dollar positions following sluggish US stock market over weakness in housing market and anxiety continued over the credit markets.

In active trade at the Interbank Foreign Exchange (Forex) market, the Indian unit opened sharply lower at 40.50/51 per dollar against Thursday's close of 40.34/35 a dollar.

Later, it gyrated in a wide range of 40.43 a dollar and 40.57 a dollar on alternate bouts of buying and selling before ending the day at 40.51/53, a steep fall of over 17 paise over the previous close.

A sharp rise in the Japanese Yen which hit a three-month high against the dollar mainly translated into a stronger dollar against other currencies primarily the high-yielding currencies, including Indian rupee, that were long-benefited from the carry trade.

Many emerging market currencies also posted losses yesterday on unwinding carry trades.

A fall of over 541 points in the benchmark Sensex, fifth largest decline in the history of the BSE, also dampened the rupee sentiment.

The month-end dollar demand from oil refinery companies too boosted the dollar demand.

Meanwhile, the global crude oil prices once again cross USD 75 a barrel mark in late Asian trade on Friday.