Rupee tanks 58 paise to a fresh 3-month low against dollar


MUMBAI: The rupee on Tuesday tumbled by 58 paise to end at a fresh three-month low of 64.79 against the US dollar on the back of consistent demand for the greenback from state-run banks and importers.

This is the biggest single day fall for the Indian currency so far this year.

Volatility hit the domestic currency market as overall sentiment turned shaky following heavy offloading in portfolios by foreign investors and global traders in local equities.

Currency traders and speculators remained sceptical about the Fed’s outlook for three additional interest rate increases this year, especially given the extremely benign inflation backdrop in the US, leading to the sudden rupee weakness.

Strong dollar overseas due to rise in Treasury yields and release of the minutes of Federal Reserve’s last monetary policy meeting also weighed on the rupee front.

During the day, the home unit crumbled to as much as 64.86 against the US dollar before aggressive intervention by the RBI through state-owned banks.

In the meantime, foreign investors pulled out so far this month a staggering $1 billion or Rs 6,850 crore from the Indian stock market in the wake of sell-offs globally.

Reversing an eight-week uptrend, India’s foreign exchange reserves dipped to $419.76 billion during the week ended February 9, the Reserve Bank of India (RBI) said.

On the international energy front, global crude prices traded little changed amid supply restraint by the OPEC, which which started last year in order to draw down excess global inventories.

Brent crude futures were trading lower at $ 64.36 a barrel in early Asian trading.

The rupee started off the week with a gap-down at 64.50 from last Friday’s close of 64.21 at the Interbank Foreign Exchange (forex) market due to steady dollar demand.

Reeling under intense dollar pressure, the local unit plunged sharply to hit a low of 64.86 in later afternoon deals before ending at 64.79, showing a steep loss of 58 paise, or 0.90 per cent.

This is the lowest closing for the rupee since November 22, last year, when it had closed at 64.92.

The RBI, meanwhile fixed the reference rate for the dollar at 64.5254 and for the euro at 79.8566.

Meanwhile, domestic equity markets succumbed to heavy selling pressure for the third-straight day despite a strong start as wary investors booked profit at higher levels largely impacted by the biggest scam in the country’s banking sector and ahead of the expiry due on Thursday.

Most Asian stock indices finished lower.

The flagship BSE-sensex dropped over 71 points to end at 33,703.59, while Nifty fell 18 points to 10,360.40.

Globally, the US dollar held onto gains against other major currencies, although the greenback’s upward trend was expected to be limited by ongoing concerns over the US deficit.

Sentiment on the greenback remained fragile as the US deficit is projected to climb near $ 1 trillion in 2019 following the recent announcement of infrastructure spending and large corporate tax cuts.

The dollar index, which measures the greenback’s value against a basket of six major currencies, was up at 89.55 in early trade.

In cross-currency trades, the rupee dropped against the pound sterling to finish at 90.57 per pound from 90.34 and recovered against the euro to conclude at 79.95 compared to 80.18 earlier.

The home unit also edged up against the Japanese yen to settle at 60.49 per yens from 69.50.

Elsewhere, the common currency euro continued to slip lower against the US dollar despite positive sentiment data from Germany and the Euro-Zone with inflation expectations starting to pick up.

The British pound, however, staged a rebound on the back of positive news that the EU Parliament will call for a continued and privileged access for the UK to the single market after tit leave the EU.

In forward market today, premium for dollar weakened marginally due to mild receiving from exporters.

The benchmark six-month forward premium payable in July softened to 127-129 paise from 128-130 paise and the far- forward January 2019 contract moved down to 262-264 paise from 263.50-265.50 paise previously.

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