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Rupee hits fresh all-time low of 69.10 on dollar strength, FIIs outflows

"We are pretty bearish (on the rupee) at this moment, given all the circumstances combined. Not only high oil prices but also the trade war that has been taking off," Hugo Erken, senior economist at Rabobank told Reuters.

twitter-logoBusinessToday.In | July 10, 2018 | Updated 13:07 IST
Rupee falls to 69.10 level on dollar strength, FII outflows

The rupee hit its fresh all-time low in trade today in a third consecutive session of decline on appreciation of the American currency overseas and sustained foreign capital outflows. The rupee fell to 69.10 level to the dollar, steeper than the all time low the currency touched last week.

On June 28, the rupee collapsed to a record low of 69.09 against the US dollar by plunging 49 paise in early trade as rising crude oil prices deepened concerns about the country's current account deficit and inflation dynamics.

"We are pretty bearish (on the rupee) at this moment, given all the circumstances combined. Not only high oil prices but also the trade war that has been taking off," Hugo Erken, senior economist at Rabobank told Reuters.

"So, although India has a large internal market, and I still think the Indian recovery will last, the external pressure is really building at the moment. This is not good for the Indian currency."

"The main reason behind the rupee fall is the rising crude oil prices which has gone up to $73 per barrel. The other reason can also be attributed to inflation woes, fiscal deficit issues and also weak global cues. The trade war of tariffs between USA and China is now confirmed and this too has led to weakening of rupee. There is sudden outflow of dollars from emerging economies and this has also impacted Indian rupee. But majorly, rising oil price and trade war tension has impacted the Indian currency movement. Stock market will also see some negative influence as India is a sentiment driven market and this weakening of rupee, trade war and rising prices of petrol will create a sentiment which is detrimental. FII and other investors might not pump money into India and would rather wait for circumstances to get better. The sectors which benefit during this scenario is information technology and exporters. Since IT industry gets their money in dollars this would mean their revenue's goes up. Exporters will also be in joyous mood as they will make additional profits due to weak rupee," said Amit Kachroo, managing partner at Aaneev Wealth.

Fears over a slowdown in the country's economy amid surging international crude oil prices along with unambiguously hawkish Federal Reserve policies and widening current account deficits kept the forex sentiment highly nervous.

A sudden outrush of foreign investors triggered by the US Federal Reserve signalling of a tighter monetary policy further complicated the challenges of managing currency markets.

Foreign portfolio investors (FPIs) sold shares worth Rs 159.37 crore on Thursday, as per provisional data.

In fact, FIIs have been net sellers during the last three months offloading Rs 13,344 crore in Indian equities putting pressure on the local currency.

After an extraordinarily smooth ride in 2017, the home currency has been on a steady decline since April and crashed to a life-time low of 69.09 on June 28 this year. On July 2, the rupee had hit its life-time closing low of 68.80 a dollar.

Escalating trade tensions, triggered by tariffs and counter-tariffs too are weighing on the trading front.

The government's announcement to hike minimum support price (MSP) of kharif crops is expected to contribute to inflationary pressures in the economy and that may prompt the central bank to raise interest rates more steeply than expected, a forex dealer said.

The rupee stands out as one of the most vulnerable and worst performing currencies in Asia with an almost 8 per cent fall in the value against the resurgent dollar bull.

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