Rupee closes at six-week low against US dollar ahead of inflation data
Mumbai: The Indian rupee on Monday closed at six-week low against the US dollar after local equity markets fell 281 points on the concerns of widening fiscal deficit after the government reduced goods and services tax on some items.
The home currency closed at 65.43 against the dollar -- a level last seen on 3 October, down 0.41% from its Friday’s close of 65.17. The rupee opened at 65.38 a dollar and touched a low of 65.53.
The Goods and Service Tax (GST) Council on Friday decided to cut the tax rate on 177 items from 28% to 18%, leaving only 50 items in the highest tax slab and offering major relief to consumers and businesses.
The benchmark Sensex index fell 0.84%, or 281 points, to 33,033.56 points. So far this year, it has gained 24%.
Bond yields hit a fresh six-month high, after the Reserve Bank of India (RBI) announced another open market debt sale. RBI plans to sell as much as Rs10,000 crore of bonds via open market operations on 23 November.
The 10-year bond yield ended at 6.972%, a level last seen on 2 May, compared to its previous close of 6.957%. Bond yields and prices move in opposite directions.
Traders are cautious ahead of the Consumer Price Index (CPI)-based inflation data due after 5.30pm. Over 30 economists polled by Reuters are putting consumer price inflation at 3.46% in October from a year ago, up from 3.28% in September.
The government will issue Wholesale Price Index (WPI)-based inflation data on 14 November. A Reuters poll predicts wholesale price inflation to rise 3.01% in October from a year ago, compared to 2.60% rise in September.
So far this year, the rupee has gained 3.8%, while foreign institutional investors have bought $7.31 billion and $22.42 billion in equity and debt, respectively.
Asian currencies were trading mixed ahead of the US consumer price inflation data on 15 November before the Federal Open Market Committee begins its two-day meeting on 14 December. The Fed is widely expected to raise interest rates again, with the market pricing in a more than 80% probability of a December hike.
China offshore was up 0.17%, Philippines peso 0.16%, Thai baht 0.11%, Japanese yen 0.08%. However, South Korean won was down 0.33%, Singapore dollar 0.08%, Indonesian rupiah 0.08%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.596, up 0.22% from its previous close of 94.391.