Rupee closes at near two-month low amid global sell-off
Mumbai: The Indian rupee on Tuesday closed at a near two-month low against the US dollar, following sell-off in global and local equity markets amid strong US jobs data.
The home currency ended at 64.25—a level last seen on 14 December, down 0.28% from its previous close of 64.07. The local currency opened and touched a low of 64.40 a dollar.
India’s benchmark Sensex index fell 1.61% or 561.22 points to 34,195.94. So far this year, Sensex has risen 0.41%.
Meanwhile in the US, the Dow Jones Industrial Average fell over 1,100 points, its biggest fall since six-and-half years after US wage data on Friday pointed to quickening inflation, which may lead to higher rates by the US Federal Reserve.
Indian markets are already under pressure after the government presented the budget that focused on populist measures ahead of general elections in 2019 and imposed a long-term capital gains tax on equities.
Traders will also keep an eye on the Reserve Bank of India’s (RBI) interest rate decision on 7 February. Analysts expect the RBI to keep interest rates on hold on expectations that inflation may accelerate further due to higher crude oil prices and a proposed hike in minimum support prices (MSP) for farmers.
Of the 15 economists surveyed by Mint, 14 expect the central bank to keep repo rate—the rate at which the central bank infuses liquidity in the banking system—unchanged at 6%. Only one expects a rate hike of 25 basis points.
Analysts said breaching its fiscal deficit target for fiscal year 2017 and upward revising its deficit target for next fiscal could prompt RBI to change its policy stance in the near future.
Bond yield fell after economic affairs secretary Subhash Chandra Garg said that the government may skip last auction of Rs 11000 crore if yields remained higher. It has cash to manage expenses without the last auction, Garg added.
India’s 10-year bond yield was at 7.568% from its Monday’s close of 7.605%. Bond yields and prices move in opposite directions.
Since the beginning of this year, the rupee has fallen 0.6%, while foreign institutional investors have bought $2.42 billion from local equity and $1.79 billion in debt markets.
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