The rupee on Friday plunged below the psychological 68-mark to end at near nine-month low as growing US rate hike expectations and a strong dollar hit the sentiment.
The currency fell by 31 paise to end at 68.13 against the US dollar, the lowest closing since February 29. 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 domestic currency, the dealer said. Demonetisation of Rs 500 and Rs 1,000 notes also added to the bearishness.
Hitting the sentiment in emerging markets, 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.
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 rupee continued to slide against the pound sterling to finish at 84.66 from 84.55. After falling to a low of 26,106.78 on sustained foreign fund outflows, the Sensex recovered briefly to touch 26,349.02, before dipping again by 77.38 points, or 0.30 per cent, to 26,150.24, its lowest level since May 25, 2016.
The index has dropped by 1,367.44 points or 4.97 per cent in five days on lingering worries about the economic impact of demonetisation.For the week, the Sensex crumbled 668.58 points, or 2.49 per cent, while the Nifty plunged 222.20 points, or 2.67 per cent. The NSE 50-share Nifty moved lost 5.85 points or 0.07 per cent to end at 8,074.10.
Foreign funds continued their selling spree, offloading shares worth a net Rs 983.93 crore Thursday, as per provisional data released by the stock exchanges.
Globally, gold hit its lowest level since late May, as the dollar surged to a near 14-year high on expectations for a US rate hike next month and more infrastructure spending from the new Trump administration. Gold extended its slide at the domestic bullion market here on Friday as prices plunged by Rs 445 following sustained selling by stockists and investors.