The Indian rupee (INR) suffered sharp losses against the US dollar (USD) today amid a turmoil in both global equity and currency markets. The rupee fell to 70.74 against the US dollar, as compared to its previous close of 69.60 a dollar - its biggest one-day fall in nearly six years. Throwing the global currency market into turmoil, China today let its currency yuan tumble beyond the key 7-per-dollar level for the first time in more than a decade.
Here are 5 things to know about rupee's fall today:
1) After opening at 70.06 a USD, the rupee weakened to 70.74 at day's low. The rupee also closed at the lowest point of the day at 70.74 a dollar.
2) Indian stocks markets fell sharply today, tracking a selloff in other Asian markets. "The panic across asset classes is evident. There is a flight to safety towards US Treasuries, gold and carry currencies like euro and Japanese yen," IFA Global added. Gold prices hit six-year high in global markets while futures surged to record highs in India.
3) Outflows from Indian markets also hurt the rupee. Domestic investor sentiment in equities, which seemed to be upbeat on Friday after reports said the government was looking into foreign portfolio investors' tax concerns, returned to being bearish due the escalating trade war. The Sensex fell over 700 points today at day's lows. Foreign portfolio investors (FPIs) pulled out a net ₹2,632.58 crore from equities and ₹248.52 crore from the debt segment in the first two trading sessions of this month.
4) "USD/CNY (China's yuan) has broken through the psychological 7.00 mark, causing panic in Asia session. Barriers have been knocked out, causing traders to scamper for cover," forex advisory firm IFA Global said in a note. Investors are less optimistic about US and China managing to secure a trade deal, IFA Global added.
5) "China has a limited set of measures at its disposal with which it can get back at the US as it does not import as much from the US as the US does from China. Currency is one of the tools they can use to negate the impact of tariffs to some extent," IFA Global said. Last week, US President Donald Trump vowed to impose fresh tariff on $300 billion worth of Chinese goods from September 1.(With Agency Inputs)