Rupee drops the most in six years as Kashmir adds to yuan woes2 min read . Updated: 05 Aug 2019, 05:50 PM IST
- Rupee crashes ₹1.13 to 70.73 versus US dollar
- China's yuan weakened below 7 to the dollar on Monday as the escalation in the US-China trade war shook currency markets
Mumbai: The Indian rupee on Monday weakened most against the US dollar since September 2013 after the government scrapped the article that granted special status to Jammu & Kashmir, heightening political uncertainty in the region. The fall in currency was also in line with its other Asian peers amid speculation Beijing may allow currency depreciation to counter President Donald Trump’s latest tariff threat.
The rupee ended 1.6% lower at 70.73 a dollar, its steepest fall since 3 September, 2013. On Friday, it closed at 69.60. The local currency opened at 70.06 and touched a low of 70.72 a dollar. So far this year, it declined 1.3%.
The Centre on Monday scrapped Article 370 of the Constitution that grants special status to Jammu and Kashmir, with an order saying “it shall come into force at once". The abrogation follows the Centre introducing the Jammu and Kashmir Reorganization Bill in Parliament.
Meanwhile, the yuan plunged below 7 per dollar for the first time since 2008 after US President Donald Trump abruptly decided to impose new tariffs on Chinese goods, escalating the trade war with China. Beijing pledged to respond if the US goes ahead with its plan to impose 10% tariff on a further $300 billion in Chinese imports.
"First, the Fed became the second major Central Bank (after ECB last week ) to disappoint markets, as it delivered a less than dovish cut of 25bp . To add to the woes, Trump announced another round of tariffs on the last remaining tranche of Chinese imports. China has already warned of retaliation and now all eyes will be on how China reciprocates, and everything else will likely take a backseat for now, in our view", said Nomura Research in a note.
"Geopolitical and trade tensions continue to rise, with the US withdrawing from a nuclear treaty with Russia , North Korea conducting another missile test, and Japan-South Korea threatening to remove each other from trade whitelists, which could further dampen the growth outlook for the region," it added.
Traders will now await Reserve Bank of India's bi-monthly policy due on Wednesday. RBI’s monetary policy committee is expected to lower the repo rate by 25 basis points as tepid consumption and investment growth continue to hurt economic expansion, a survey of 10 economists and company treasurers by Mint showed.
So far this year, foreign investors have bought $9.24 billion in local equities and $2.49 billion in domestic debt.
Among Asian currencies, China Offshore was down 1.62%, South Korean won lost 1.46%, China renminbi fell 1.43%, Philippines peso declined 0.84%, Taiwan dollar was down 0.78%, Indonesian rupiah fell 0.49%, Malaysian ringgit declined 0.47%, Singapore dollar fell 0.34%, Hong Kong dollar lost 0.14%, and Thai Baht 0.12%. However, Japanese yen was up 0.52%.
The dollar index, which measures the US currency’s strength against a basket of major currencies, was at 97.674, down 0.41% from its previous close of 98.074.
(Bloomberg contributed to this story)