Mumbai: The Indian rupee on Friday recovered from its all-time low as state-run banks sold dollars, reported Bloomberg, citing two Mumbai-based traders. The rupee closed at 68.85, up 0.29% from its previous close of 69.05. It opened at 68.97.

“Price action suggests that the RBI intervened via state banks and that has helped the rupee recover", the Bloomberg report added.

Asian currencies also reversed earlier declines triggered by China weakening the yuan’s daily fixing by the most in more than two years. The shift came after a sudden paring in the yuan’s drop, which spurred speculation of some type of intervention by Peoples Bank of China.

Earlier in morning trade, the currency touched a fresh record low of 69.13 a dollar after China weakened the fixing yuan by the most since June 2016, just a day after cutting it beyond the 6.7 per dollar level, which was previously thought to be a key threshold. PBOC weakens yuan fixing by 0.9% to 6.7671 per dollar, weaker than average estimate of 6.7654.

“Risk sentiments had tentatively stabilised in past few days, but two-pronged problems has resurfaced - the US Fed’s confidence on the US growth has provided a fresh tailwind to US dollar, weakening emerging market currencies. Concurrently, a weaker Yuan fixing and the offshore counterpart signalling further depreciating pressure, is also spilling over to the AXJ FX universe. These factors have put the brakes on rupee’s recent rally" said Radhika Rao economist at DBS Bank.

The rupee was already under pressure due to continued surge in the crude oil which has raised concerns of quickening inflation. Outflows by foreign investors from local equities and bond market also dampened the sentiment.

“Fragile global risk sentiments and increasing domestic vulnerabilities have continued to weigh on INR in CY2018 after a stellar performance in CY2017. The unrelenting capital outflow from EMs is a reflection of the increasing global risks as DM monetary policies normalize and trade war threatens to derail the global economic recovery. Adverse global backdrop, deteriorating domestic macro scenario and domestic political uncertainty could continue to keep the INR under pressure", Kotak Institutional Equities said in a 11 July report.

So far this year, the rupee has weakened 7.3%, while foreign investors have sold $964.30 million and $6.27 billion in equity and debt markets, respectively.

Benchmark Sensex Index rose 0.40% or 145.14 points to 36,496.37. Since January, it has gained 7%

The 10-year bond yield ended at 7.785%, from its Thursday’s close of 7.782%. Bond yields and prices move in opposite directions.

Bloomberg contributed this story

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