Rupee crumbles to over 1-month low, tanks 26 paise to 65.42 vs USD

Re-emergence of Fed rate hike worries along side aggressive hedging strategy adopted by importers in the wake of implied currency volatility and ahead of CPI and WPI inflation data release predominantly kept forex market undertone shaky.

Growing concerns over likely fiscal slippage following a sudden spike in global crude prices and possible tax shortfall due to biggest GST rejig last weekend also added nervousness to jittery trade.

At the Interbank Foreign Exchange (FOREX), the rupee opened sharply lower at 65.38 against weekend close of 65.16 due to heavy demand for the American unit from importers and corporates.

Keeping the descending trend intact, the local unit suffered a late-afternoon blow to hit a fresh intra-day low of 65.51 before concluding at 65.42, showing a steep loss of 26 paise, or 0.40 percent.

This is the lowest closing for the home currency since October 3.

The Indian currency has fallen 61 paise last week to the dollar.

The RBI, meanwhile, fixed the reference rate for the dollar at 65.4272 and for the euro at 76.2161.

The reduction in taxes is estimated to have an impact on government revenue to the tune of Rs 20,000 crore annually.

Heightened tensions in the Middle East as well as fresh political uncertainty in the UK too compounded woes.

Meanwhile, industrial production grew at a slower pace of 3.8 percent in September, mainly due to subdued performance of the manufacturing sector.

The crude oil benchmark Brent is trading marginally up at USD 63.54 a barrel in early Asian trade.

In the meantime, domestic bourses suffered a big jolt as investors resorted to heavy profit-taking after its two-day winning streak on growing concerns over rising crude prices and also impacted by disappointing macroeconomic data output.

Mounting uncertainty about the prospects for US tax cuts also dented global trading sentiment.

Baring China, most Asian markets retreated sharply.

The Flagship BSE Sensex tumbled 281 points to close at 33,033.56, while Nifty shed 97 points at 10,224.95.

On the global front, the greenback rebounded from last weekend fall to trade modestly higher against its major trading partners.

The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 94.42 in early trade.

In cross-currency trades, the rupee regained some lost ground against the pound sterling to settle at 85.61 from 85.67 per pound, but remained subdued against the Japanese yen to end at 57.74 per 100 yens from 57.43 earlier.

The home unit also dropped against the Euro to finish at 76.23 from 75.83 last Friday.

Elsewhere, pound sterling took a big knock after the report of 40 conservative members of Parliament signing the no-confidence letter to Prime Minister Theresa May triggered near-term uncertainty and also concerns over the breakdown in Brexit talks.

Euro traded little changed against the greenback.

In forward market today, premium for dollar declined owing to mild receiving from exporters.

The benchmark six-month premium payable in April softened to 132-133 paise from 132.50-134.50 paise and the far forward October 2018 contract also moved down slightly to 271.50-273 paise from 273-275 paise previously.

On the international energy front, global crude prices traded steady on Monday, trapped between a bullish push from tension in the Middle East and downward pressure from evidence of rising US production, although record fund bets on a rally kept the price in sight of two-year highs.

Brent crude futures were down 17 cents at USD 63.35 a barrel. US West Texas Intermediate (WTI) crude eased 6 cents to USD 56.68.