The rupee on Thursday plunged by 43 paise and closed below the 69 level for the first time at a historic low of 69.05 as the US currency rose to a one-year high level against global currencies, exacerbating the challenges for both importers and foreign currency borrowers. The Indian currency’s fall on Thursday was the biggest single-day fall since May 29. The last time the rupee hit an all-time closing low of 68.9413 was on July 5. It touched all-time intra-day low of 69.09/10 on June 28. According to India Rating, the importers could face challenges in passing on the dual impact of high input costs and weak rupee to their customers. “In addition, foreign currency borrowers with large unhedged positions are likely to be worst affected by the weakening of rupee,” it said. As of March 2017, of the total debt, around Rs 3,53,000 crore was denominated in foreign currency, of which around Rs 1,51,000 is estimated to be unhedged. The US dollar surged to fresh one-year high after the US Federal Reserve Chairman Jerome Powell’s testimony to the US Senate bolstered the expectations of interest rate hikes, though gradually. The two-year Treasury yield was near the multi-year high mark of 2.624 per cent, hitting the attraction of emerging market currencies. The Parliament will debate a no-confidence motion tabled by Opposition parties against Prime Minister Narendra Modi’s government, which weighed on the forex market sentiment. The RBI did not resort to a major intervention to support the local currency, pushing the currency down to a low of 69.07 during the day’s trade. The rupee had touched an all-time low intra-day low of 69.10 on June 28 but had recovered later on suspected RBI intervention. The market mood somewhat worsened after China stepped up its game against the US and the People’s Bank of China devalued the Yuan once again in what many see as a move against the US. Most Asian currencies also dropped against the dollar as concerns over a tariff war between the US and China endured, keeping investors cautious on regional trades. The dollar extended gains on Thursday as US weekly jobless claims came in lower than expected, reinforcing the Fed’s messages that the American economy is on solid footing. A downbeat mood gripped equities, and US futures slipped as the corporate earnings season continued to ramp up. The greenback strengthened a third day following US Federal Reserve Chairman’s upbeat assessment of the domestic economy, and after the Beige Book economic report showed growth holding up. The move was in stark contrast to that of the Chinese yuan, which fell to a one-year low as the country’s central bank showed little sign of intervening to slow the currency’s descent. The domestic bond market also showed volatile trading and the 10-year benchmark yield falling 4 bps to 7.79 per cent. The dollar index, which measures the greenback’s value against a basket of six major currencies, was up at 95.39. The BSE Sensex also closed lower by 22.21 points at 36,351.23, while the Nifty 50 fell 23.35 points to close at 10,957.10. The BSE MidCap and SmallCap fell 0.63 per cent and 1 per cent, respectively. “The market was range bound with a negative bias due to weakening rupee on account of surge in dollar index and ongoing trade spat. Global cues are not clearly supporting domestic market direction. Trade tensions between US and other major economies are keeping investors on edge. Mid and small-cap continued to underperform due to volatile rupee while PSU banks gained in expectation of the government’s recapitalisation measures,” said Vinod Nair, head of research, Geojit Financial Services.
