Rupee crumbles to 1-month low on capital outflow fears

Continued slide in local equities amid fresh withdrawal of funds by FPIs also weighed on the rupee trade. Some dollar selling by exporters helped the rupee to cushion the fall, forex traders said. Currency traders also preferred to stay on sidelines ahead of the GST rollout from July 1.

By: PTI | Mumbai | Published: June 29, 2017 7:32 pm
sensex, nifty, rupee, rupee close, market close, stock market, market news, business news, india express news The rupee resumed sharply higher by 9 paise at 64.46 per dollar as against Wednesday’s closing value of 64.55 at the Interbank Foreign Exchange (Forex) Market.

Caught in a downward spiral for the third straight session today, the rupee fell by another 8 paise to end at a fresh one-month low of 64.63 against the US currency amid sustained dollar demand from importers. This is the lowest closing for the domestic currency since May 30. Heightened uncertainties over an impending Fed rate hike along with heavy capital outflows predominantly impacted the sentiment at the forex market.

Continued slide in local equities amid fresh withdrawal of funds by foreign portfolio investors (FPIs) also weighed on the rupee trade. However, some dollar selling by exporters helped the rupee to cushioned the fall, forex traders said. Currency traders also preferred to stay on sidelines ahead of the GST rollout from July 1.

The government has planned a special midnight session of Parliament on 30 June to rollout the landmark tax regime. The rupee resumed sharply higher by 9 paise at 64.46 per dollar as against Wednesday’s closing value of 64.55 at the Interbank Foreign Exchange (Forex) Market. It strengthened further to 64.44 on bouts of dollar selling by exporters and banks and also supported by higher domestic equities.

However, the local unit succumbed to heavy dollar pressure in mid-afternoon trade to reverse its strong rising momentum. After retracing session’s low of 64.65 towards the fag- end trade, it finally ended at 64.63, revealing a loss of 8 paise, or 0.12 per cent.

In three days, the rupee has lost 11 paise. The RBI, meanwhile, fixed the reference rate for the dollar at 64.4715 and for the euro at 73.5233. Foreign portfolio investors (FPIs) sold shares worth a net Rs 469.09 crore yesterday, as per provisional data.

Domestic stocks ended with modest gain after relinquishing early strong gains as volatility once again dominated trading sentiment during the fag-end session due to pressure of derivative expiry of June contracts. On the global front, the dollar traded substantially weak against it major rivals amid concerns that soft US GDP
figures may apply a degree of downside pressure but that may be offset by US dollar weakness amid cooling Fed rate hike speculation.

The dollar index, which tracks the US currency against a basket of six major rivals, was little changed at 95.71. In cross-currency trades, the rupee remained under pressure against the pound sterling and finished at 83.83 from 82.77 per pound and also dropped further against the euro to 73.67 from 73.44 earlier.

It, however, continued to surge against the Japanese yen to settle at 57.38 per 100 yens from 57.58 yesterday. In forward market today, premium for dollar drifted further owing to good receivings from exporters.

The benchmark six-month premium payable in November declined to 121-123 paise from 125-127 paise and the far forward May 2018 contract also moved down to 266-268 paise from 269-271 paise. On the International commodity front, crude prices futures rose for a sixth consecutive session on Thursday, as falling US production underpinned the market that has been under pressure in the face of global supply glut. The US West Texas Intermediate (WTI) crude rose 7 cents, or 0.2 per cent, to USD 44.81 per barrel in early Asian trade.

Meanwhile, Goldman Sachs has downgraded its forecast for oil prices over the next quarter amid a sudden uptick in shale drilling and an unexpected surge in production from Libya and Nigeria.

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