The rupee on Monday fell by 30 paise to close at a fresh 2016-low of 68.76/77 against the US dollar amid nearly $5 billion outflows from foreign institutional investors (FIIs) in local equity and bond markets since the government announced the demonetisation scheme.
The local unit hit a high of 68.42 and a low of 68.80 in intra-day trade on Monday. A major reason for the fall in the rupee was FII selling in India and other emerging market assets on rising expectations of a possible US interest rate hike in its next mid-December policy. Besides, speculation is rife that US president-elect Donald Trump’s reflationary policies will mean a quicker pace of monetary tightening by the US Federal Reserve. Markets fear that he will take a more protectionist approach to trade, weighing on emerging market assets.
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“Massive funds outflows in the wake of impending US Fed rate hike and a bullish dollar overseas have hit the rupee sentiment. Ongoing redemption pressure on foreign currency non-resident (FCNR) deposits also aided to the rupee woes,” said a dealer.
According to a dealer, the initial positive momentum failed to gain ground with the currency retreating sharply to hit intraday low of 68.80 before ending at 68.76 — its lowest closing level so far this year — showing a steep loss of 30 paise, 0.44 per cent. The rupee has shed 3.95 per cent of its value since the beginning of 2016. The rupee had plunged to a record low of 68.86 last Thursday before recovering on RBI intervention to settle at 68.74 — the lowest level in 39 months.
India’s foreign exchange reserves dipped for the second consecutive by $1.542 billion to $365.5 billion in the week ended November 18, the Reserve Bank of India said. The country’s forex reserves had gone down by $1.19 billion to $367.04 billion in the previous week. The RBI on Saturday ordered banks to maintain incremental CRR (cash reserve ratio) of 100 per cent on the increase in NDTL (net demand and time liabilities) between September 16, 2016 and November 11, 2016 from the fortnight beginning November 26, 2016. This action is estimated to suck out around Rs 3-3.5 trillion of surplus liquidity from the banking system.
Meanwhile, in a volatile trade, BSE Sensex moved up by another 34 points to end at 26,350.17 on sustained buying mainly in telecom, power, realty and auto, but banking stocks were under pressure as RBI increased the CRR to 100 per cent on incremental deposits. Besides banking, shares of consumer durables, finance and IT sectors declined due to selling pressure. The Sensex resumed lower at 26,303.52 and hovered in wide a range of 26,183.22 and 26,413.99 before ending at 26,350.17, showing a gain of 33.83 points or 0.13 per cent.
The Sensex had gained by 490 points, or 1.89 per cent, in two days. The NSE 50-share Nifty moved up by 12.60 points, or 0.16 per cent, to end at 8,126.90. Overseas, most Asian stocks rose as oil prices slid on unease about this week’s meeting of OPEC members to discuss possible output cuts. With PTI