The rupee continued its losing streak for a fourth straight session to hit a fresh 13-month low of 65.80 a dollar, dropping 14 paise as growing worries over higher crude prices and likely fiscal slippages led to subdued forex market sentiments. The Indian currency logged its lowest closing since March 14, 2017, when it had closed at 65.82 against the US dollar. The rupee emerged as the worst performer among the major Asian and emerging market currencies.
The rupee has depreciated by a staggering 60 paise in the recent spell of downtrend. World crude prices rose to a new 2018 peak of USD 74 a barrel, following reports of a sharp fall in US crude inventories coupled with Middle East tensions and also growing optimism ahead of major oil producers’ meet on Friday.
The rapid surge in global crude oil prices has already had an adverse impact on India’s import bill and can further hit the country’s fiscal arithmetic, a forex dealer commented. During 2017-18, oil imports recorded a growth of 25.47 per cent to USD 109.11 billion. Brent crude, an international benchmark, was trading at USD 74.58 a barrel in early Asian trade – highest level since November 2014.
Besides, heightened worries that worsening terms of trade would be a drag on the current-account deficit against the grim backdrop of crude headwinds largely weighed on the forex trade. The Indian currency has been weighed down by a variety of other factors, including concerns that faster-than-expected tightening of US monetary policy and President Donald Trump’s protectionism will hurt the Indian economy the most and vulnerable to capital outflows.
“The rupee continued its weakness …against the greenback on the back of firm oil prices ahead of OPEC meeting, higher US bond yields and foreign outflows. US dollar’s firmness takes cues from the Fed’s Beige book, which outlined the economy to be positive despite recently imposed tariffs,” Anand James, Chief Market Strategist at Geojit Financial Services, said.
On the domestic front, foreign institutional investors pulled out Rs 2,404 crore from the equity markets while in debt markets, they sold worth Rs 4,070 crore in the current week, putting further pressure on rupee, he said. The home currency started the day lower at 65.78 as compared to overnight close of 65.66 at the inter-bank foreign exchange (forex) market.
It later took a deep plunge to hit a fresh session’s low of 65.86 in mid-afternoon deals on panic dollar buying before concluding at 65.80, revealing a steep fall of 14 paise, or 21 per cent. In the meantime, the benchmark 2028 bond yield surge to close at 7.63 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 65.7837 and for the euro at 81.3876. The dollar index, which measures the greenback’s value against a basket of six major currencies, was up at 89.31. In the cross currency trade, the rupee retreated against the pound sterling to settle at 93.68 from Wednesday’s close of 93.31 and also fell back against the euro to finish at 81.41 as compared to 81.28 on Wednesday.
The local unit, however, ended steady against the Japanese yen at 61.27 per 100 yens. In forward market on Thursday, premium for dollar displayed a mixed trend owing to lack of market moving factors. Both the benchmark six-month forward premium payable in August eased to 93-95 paise from 94-96 paise, while the far-forward February 2019 contract edged up to 217-219 paise from 216-218 paise on Wednesday.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines