Rupee closes at 18-month low against US dollar
The rupee closed at 68.43 against the US dollara level last seen on 29 November 2016, down 0.56% from its previous close of 68.04
Mumbai: The Indian rupee on Wednesday weakened to 18-month low against the US dollar after foreign institutional investors (FIIs) continued to sell in the local equity and debt markets following the global trend amid surging crude oil prices.
The currency is now just 0.6% away from its all time closing low of 68.825 which was hit on 28 August 2013. In intraday, Rupee hit a low of 68.8625 on 29 November 2016.
The home currency ended at 68.43 against the US dollar—a level last seen on 29 November 2016, down 0.56% from its previous close of 68.04. The currency opened at 68.14 a dollar and touched a low of 68.46 a dollar.
The partially convertible rupee has fallen over 6.4% so far this year, making it the worst-performing Asian currency.
Since start of April, FIIs have sold a combined $4.5 billion in local equity and debt, respectively. Year to date, they have bought 494.40 million in equity and sold $4 billion in debt.
“The recent depreciation of the INR can be attributed to FPI outflows from Indian markets - both equity and debt - over the past two months" said brokerage firm Nirmal Bang on 23 May report. The brokerage firm has increased its estimate for FY19 to 68.7 from 66 earlier, while for FY20 forecast stands at 71.5.
Analyst expects that surge in crude oil could cause a major headwind for Indian markets in the general election year and may increase inflationary pressures and lower the chances of a interest rate cut by the Reserve Bank of India (RBI).
The failing to form government in Karnataka by Bharatiya Janata Party, despite being single largest party, will put pressure on the government to ramp up spending to woo more rural voters. This may lead, analyst fears, to adopt more populist measures due to which government may not be able to stick its fiscal deficit target.
The fiscal deficit target was breached in the 2018 fiscal year while goal for this year was widened to 3.3% of gross domestic product.
The rupee is already under pressure due to external factors, such as rising US bond yields, geopolitical concerns and a trade war threat.
Traders are awaiting release of the minutes of the Federal Reserve’s early-May policy meeting later Wednesday.
The 10-year bond yield closed at 7.849% from its Tuesday’s close of 7.812%. Bond yields and prices move in opposite directions.
Benchmark Sensex Index fell 0.88% or 306.33 points to 34344.91. Since January, it has gained 0.5%.
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