Mumbai: The rupee on Monday hit a fresh two-year low against the US dollar as foreign investors continued to liquidate their investment in the equity markets and Asian currencies weakened.

Dollar demand was heavy which currency dealers attributed to oil-related payments to Iran. The total bill is estimated at $6.5 billion, which should be repaid in two months.

Nationalized banks and exporters sold dollars at higher level, but the Reserve Bank of India may not have intervened in the market to strengthen the local currency, dealers said.

The currency closed at 66.83, down 0.54% from its previous close of 66.47. The local unit opened at 66.58 per dollar and touched a low of 66.89, a level last seen on 4 September 2013.

Most Asian currencies closed lower after the Chinese stock market fell 2.5% despite assurances that the worst was over.

Malaysian ringgit was down 1.62%, South Korean won 0.9%, Indonesian rupiah 0.66%, Thai baht 0.39%, Philippines peso 0.37%, Japanese yen 0.32%, Taiwan dollar 0.25%, Singapore dollar 0.21% and China renminbi 0.15%.

But there is no panic in the market, said Harihar Krishnamoorthy, head of treasury at FirstRand Bank.

The benchmark Sensex index fell 308.09 points, or 1.22%, to 24,893.81. According to advance estimates, foreign investors sold bet of ₹ 1,100 crore in equities, currency dealers said. The actual figure is released with a one-day lag.

Foreign institutional investors (FIIs) were net sellers in 14 out of 17 sessions in the local equities market. Since 11 August, FIIs have sold equity worth $3.29 billion.

Weak monsoon rains and its withdrawal are leading to fears that food prices may spike and prevent Reserve Bank of India from lowering rates, Bloomberg reported

The yield on India’s 10-year benchmark bond closed at 7.803%—a last level seen on 25 August, compared with its Friday close of 7.754%. Bond yields and prices move in opposite directions.

Since the beginning of this year, the rupee has lost 5.66%, while FIIs have bought $4.09 billion from local equity and $6.35 billion from bond markets.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.241, up 0.01% from its previous close of 96.229.

The US Federal Reserve is scheduled to meet on 16-17 September, the outcome for which is eagerly awaited as many believe the Fed may start hardening its stance, or at least give a clear path of rate hikes, following the meeting.

Anup Roy contributed to this story.

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