The rupee fell by 16 paise to close at 71.44 against the US dollar Tuesday, its third straight session of loss, as dollar strengthened and stock prices fell. Concerns over foreign capital outflows and slowing global growth weighed on the domestic currency. At the Interbank Foreign Exchange market, the rupee opened higher at 71.22 but came under selling pressure.
It ended at 71.44 per dollar, down by 16 paise against its previous close. The rupee has now lost 41 paise in three days.
The International Monetary Fund growth estimates released Monday, predicted that the global economy will grow at 3.5 percent in 2019 and 3.6 percent in 2020, down 0.2 and 0.1 percentage point respectively from its earlier estimates.
The IMF projected India to grow at 7.5 per cent in 2019 and 7.7 per cent in 2020. According to the advance estimates of Gross Domestic Product released by the Central Statistics Office (CSO), the economy is estimated to grow at 7.2 per cent in the current financial year, up from 6.7 per cent in the previous year.
The IMF in its January World Economy Outlook update Monday said India would remain the fastest growing major economies of the world.
Apart from capital outflow by FPI in January, rising crude oil prices also added to the rupee’s fall. Despite some easing on global crude oil prices Tuesday on growth concerns, prices are expected to remain higher on OPEC production cut and drop in US oil rig counts.
Traders in the currency market said worries over global growth slowdown and trade tensions and US federal government shutdown triggered safe heaven buying and helped the greenback and Japanese yen trade higher, while adding to the nervousness in the rupee.
The dollar index inched higher for the sixth day, its longest streak after October 2018. Currency traders expect the rupee to fall below Rs 72 mark due to continued weakness.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.3761 and for rupee/euro at 81.0438. The reference rate for rupee/British pound was fixed at 91.8963 and for rupee/100 Japanese yen at 65.23. Global Crude oil prices fell nearly 2 percent Tuesday evening on concerns that that an economic slowdown in China may be spreading to other countries.
On Monday, China reported the lowest annual economic growth in nearly 30 years. Weakness in stock markets also added to selling pressure in the rupee, as BSE Sensex dropped 134.32 points to end at 36,444.64, while the broader NSE Nifty finished 39.10 points lower at 10,922.75 Tuesday. Traders and investors turned cautious and booked profits in recent gainers like Reliance Industries, dragging down key indices.
Foreign portfolio investors (FPIs) continued their selling activity and sold shares worth a net Rs 299.79 crore, while domestic institutional investors (DIIs) made net purchases to the tune of Rs 520.80 crore Monday, provisional data showed. Metal sector stocks faced heavy selling Monday after most base metals weakened at the London Metal Exchange on demand concerns due to slowdown in China. BSE metal fell the most at 2.31 per cent, followed by auto 0.86 per cent, infrastructure 0.60 per cent and capital goods 0.42 per cent. Healthcare index surged 1.17 per cent, realty 0.91 per cent, consumer durables index rose 0.90 per cent and oil & gas 0.41 per cent.