Mumbai: The Indian rupee on Wednesday closed at a six week low against the US dollar ahead of the first press conference of the US president elect-Donald Trump.
Traders are awaiting press conference of Donald Trump at 11am in New York and will seek details of Trump’s agenda and policy intentions.
The home currency closed at 68.33 a dollar—a level last seen on 1 December, down 0.22% from Monday’s close of 68.18. The rupee opened at 68.24 a dollar and touched a high and a low of 68.18 and 68.39 respectively. So far this year it fell 0.6%.
In his election manifesto, Trump has promised a large fiscal stimulus package, comprising tax cuts and higher government spending which might widen the fiscal deficit. This will lead to sharp recalibration on inflation expectations which are worrying traders.
“Today’s fall is attributed to the fear of protectionist measures that may be announced by the president-elect Donald Trump ahead of his inauguration,” said Abnish Kumar Sudhanshu, director & research head, Amrapali Aadya Trading & Investment
“Ever since Trump won Presidential elections, US business confidence has risen tremendously on promises of increased stimulus and lower tax coupled with protectionism to revitalize the economy. Global equity market funds based in US are investing in the US to ride on the prospective growth story which is strengthening the US dollar. Additionally higher US fund yield also triggers outflows from emerging markets bonds, making emerging market currency weaker. We expect rupee to decline further once US economic revival gains pace,” Sudhanshu added.
On domestic front, traders are also cautious ahead of the key macro economic data on Thursday.
The government will issue index of industrial production (IIP) and consumer price inflation (CPI) data for November and December, respectively, on 12 January. According to Bloomberg analyst estimates, IIP will be at -2.2%, while CPI will be at 3.5%. The government will also release wholesale price inflation data on 16 January.
India’s benchmark Sensex index closed at 27,140.41 points, up 0.9% or 240.85 points from its previous close. So far this year it gained 2%.
The 10-year bond yield closed at 6.394%, compared to Tuesday’s close of 6.398%. Bond yields and prices move in opposite directions.
So far this year, foreign institutional investors sold $342.10 million in equity while $185 million buy in debt.
Most of the Asian currencies were trading lower. Japanese yen was down 0.49%, China renminbi 0.18%, Philippines peso 0.17%, South Korean won 0.14%, Singapore dollar 0.13%, Indonesian rupiah 0.08%, China offshore 0.06%. However, Malaysian ringgit was up 0.07%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 102.37—up 0.34% from its previous close of 102.01.