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Re plunges 62 paise, may weaken more

Re plunges 62 paise, may weaken more

Mumbai: The rupee on Tuesday closed at its lowest level in past six months on weak global risk sentiments as turmoil in Hong Kong and Argentina and US-China trade tensions spooked investors.

At the interbank foreign exchange, the rupee opened at 71.15 against the dollar and touched a high of 71.02 and low of 71.40. The domestic unit finally settled 62 paise lower at 71.40 tracking losses in the yuan. The rupee had closed at 70.78 against the US currency on Friday.

Monday was a holiday on account of Bakri-Eid. Sustained foreign institutional investor (FII) outflows from the equity markets, stable-to-positive dollar also weighed on the domestic currency. So far, in August, the rupee has depreciated by 3.75 per cent against the US dollar.

The benchmark bond yield rose by 2.5 bps to close at 6.52 per cent while the equity markets witnessed huge sell-off, down by 1.65 per cent for the day. With signs of rising global risks and worsening domestic macro conditions, traders and currency experts expect the rupee weaken further.

Madhavi Arora, Economist-Forex and Rates, Edelweiss Securities, said, “Global risk aversion largely led by US-China trade tension has been weighing on the currency. Besides there appears no clarity from the government on revoking the FPI surcharge announced in the budget.

According to reports, the government is also mulling whether it should go ahead with sovereign foreign bond. As global markets re-assess risks, domestic fragile fiscal conditions stand out.”

“In the near-term, we expect the rupee and bonds to remain under pressure. The rupee may continue to depreciate as none of these global and domestic risks are showing signs of waning and infact continue to worsen. So the rupee could fiddle around these levels or worsen,” added Arora.

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