The Indian rupee (INR) hit a fresh record low against the US dollar (USD) today ahead of a no-confidence motion against the Narendra Modi government. The rupee touched 69.12 against the US dollar today, lower than its previous close of 69.05. The rupee closed at 68.85 a dollar. The present strength of the Lok Sabha is 534, including the Speaker. The Modi government needs the support of 268 MPs to cross the halfway mark.
Other Asian currencies also fell after China’s decision to depreciate the yuan the most in two years. The People’s Bank of China today set the Chinese currency’s central parity rate to 0.9% weaker against the dollar. This sent ripples through Asian markets.
Indian stock markets edged up after a cautious start ahead of the no-trust vote against the Modi government. The Sensex settled 145 points higher while the Nifty reclaimed the 11,000 mark. Asian stock markets wobbled today amid trade tensions between the US and China. Overnight, the US indices finished mostly lower.
US President Trump, in an interview with CNBC on Thursday said he was “not happy" about the Federal Reserve’s recent interest rate increases. The Fed has raised its benchmark rate for a second time this year and projected two more increases in 2018. Trump also suggested that higher interest rates left the US at a disadvantage when compared to the EU, China and Japan, allowing their currencies to weaken as the dollar strengthens.
The dollar index fell immediately after the remarks were broadcast and on Friday morning, a stronger yen saw Tokyo shares edge down.
Analysts say that the rupee is likely to remain under pressure amid domestic political uncertainty, outflows from emerging markets and normalization of developed market monetary policies.
(With agency inputs)