Dropping to an over 1-year low, the rupee breached the 63 levels to decline sharply on Tuesday to 63.58 against the dollar weighed down by the widened trade deficit data and global economic concerns amid sharp fall in oil prices.

The Indian currency had closed at 62.94 on Monday.

On Tuesday, it opened sharply lower at 63.29 per dollar as continued negative sentiments impacted the capital flows amid heavy sell off by foreign investors in the domestic equity markets.

After recovering a tad to 63.22, the rupee was trading at 63.47 per dollar at 4.30 pm.

Negative domestic data including wider trade deficit, major capital outflows and weak industrial output dragged the rupee to its lowest in 13 months.

In addition, global risks strengthened the dollar weakening major Asian currencies in the foreign exchange market.

“As more central banks will join the US Fed in its rate hike cycle, it is likely to result in outflows from the Indian economy…. In the coming year, RBI is expected to start with its rate cut cycle from early 2015 which is likely to provide some support to the rupee as it will add to the nation’s growth and will once again help in kick starting India’s growth story,” said a report by Religare retail research.

Call Rates, G-sec yields fall sharply

The overnight call money rates, the interest rates at which banks borrow from each other to overcome liquidity mismatches, was trading 8.90 per cent from the previous close of 8 per cent. Intra-day, till 4.30 pm, it moved in the range of 7.75 per cent and 9.00 per cent.

The 10-year benchmark government security (8.40 per cent G-Sec, maturing in 2024) yield dropped sharply to 7.97 per cent from Monday’s close of 7.83 per cent, which was at a 1-year low. The prices weakened by close to 100 paise to Rs 102.80 from Rs 103.76.

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