Rupee crashes below 68 level; ends at 9-month low on dollar shock

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By: PTI | Mumbai | Published:November 18, 2016 8:11 pm

The rupee on Friday crashed below the psychological 68-mark to end at near nine-month low as sentiment turned bearish on combination of growing US rate hike expectations and stunning dollar run. Witnessing a near-term rout, the home currency crumbled by a whopping 31 paise to end at 68.13 against the US dollar – the lowest closing since February 29.

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Imminent higher interest rate environment arising out of the US Federal Reserve’s hawkish tone along with heavy capital outflows took a toll on the rupee, a forex dealer said.

Frantic dollar demand from importers and corporates mainly pressurised the home unit, the dealer said. The US Dollar rallied to the highest level in 14 years against all major counterparts after Fed Chair Janet Yellen reiterated that the US interest rates could rise “relatively soon” due to an improving domestic labour market and stronger growth.

Foreign portfolio investors (FPIs) remained net sellers and sold shares worth a net Rs 926 crore today.

The domestic currency opened substantially lower at 68 from overnight closing level of 67.82 at the Interbank Foreign Exchange due to strong dollar demand in the wake of sustained foreign capital outflows.

It remained under immense pressure throughout the day and encountered extreme volatile momentum, plunging to fresh intra-day low of 68.19 in late afternoon deals before ending at 68.13, showing a steep loss of 31 paise, or 46 per cent.

Last Friday, the rupee had breached the 67 level on huge capital outflows in line with other emerging markets after expectations that Donald Trump’s new administration will increase fiscal stimulus which could lead to higher interest rates in the US.

The dollar Index was quoted sharply high at 101.11 in afternoon trade today.

Meanwhile, RBI today fixed the reference rate for the dollar at 68.0937 and euro at 72.2134.

In cross-currency trades, the rupee continued to slide against the pound sterling to finish at 84.66 from 84.55, but recovered against the euro to settle at 72.37 as compared to 72.80 yesterday.

The home unit also bounced back against the Japanese yen to close at 61.72 from 62.24 per 100 yens earlier. In the forward market, premium for dollar dropped due to fresh receivings from exporters.

The benchmark six-month premium for April drifted to 131-133 paise from 140.5-142 paise and the far-forward October 2017 contract also fell sharply to 289.5-291.5 paise from 303.75-304.75 paise on Thursday.

The rupee tumbled by 88 paise or 1.30 per cent this week due to huge foreign funds outflows of over 18,840 crore from stocks and debt markets. The rupee had closed at 67.25 on Friday last.

Crude prices retreated sharply from initially rising to a fresh two-month high in a highly volatile day on the back of a strengthening greenback amid fading expectations of production cuts from OPEC members.

The BSE Sensex stumbled for the fifth day as it touched a fresh six-month low due to continuous foreign outflows after Fed chair Janet Yellen signalled a rate hike in December policy review.

The Sensex dropped by 77.38 points, or 0.30 per cent, to 26,150.24, its lowest level since May 25, 2016.