Rupee hits 6-month low of 71.40 against dollar, dives 62 paise on global turmoil
New Delhi: The rupee plunged 62 paise on Tuesday to close at a nearly six-month low of 71.40 against the US dollar in line with battered equities as global market turmoil and Argentine currency crash drove investors to safe havens.
At the interbank foreign exchange, the rupee opened at 71.15 and touched a high of 71.02 and low of 71.40 against the American currency during the day.
The domestic unit finally settled 62 paise lower at 71.40 against the US dollar. The rupee had closed at 70.78 against the American currency on Friday.
Forex markets were closed on Monday on account of Bakri Id.
The domestic currency has lost 71 paise in the past two sessions.
Domestic forex market that was already battling against foreign fund outflows for some time has come under more pressure due to the currency crisis in Argentina and global trade war concerns.
Argentina’s peso plunged on Monday after the country’s center-right leader Mauricio Macri performed poorly in primary elections.
Continuing their bearish outlook, foreign investors sold Indian equities worth Rs 638.28 crore on a net basis on Tuesday, as per exchange data.
Meanwhile, the benchmark BSE Sensex settled 623.75 points, or 1.66 percent, lower at 36,958.16; and the NSE Nifty slumped 183.80 points, or 1.65 percent, to 10,925.85.
“Reflecting global risk-off sentiment, stock markets across the globe slumped today as fears about a drawn-out China-US trade war, protests in Hong Kong and a crash in Argentina’s peso currency drove investors to safe harbours like bonds, gold, and the yen,” said V K Sharma, Head-PCG & Capital Market Strategy, HDFC Securities.
Sharma further said that Yen has strengthened this month amid increasing signs that the US and China will not reach a quick resolution in their year-long trade war.
According to Rushabh Maru, Research Analyst – Currency and Commodity, Anand Rathi Shares and Stock Brokers, “The rupee remain under pressure as the Chinese Yuan continues to weaken. Emerging markets currencies especially steep fall in Argentina’s peso along with ongoing protest in Hong Kong are a matter of concern for the global markets.”
Argentina is currently in a recession and posted 22 percent inflation for the first half of the year, while poverty now affects 32 percent of the population.
Maru further said that “the way US 10-year and 30-year Treasury bond yields are falling, there are alarming and horrifying indications about the state of the global economy”.
According to Maru domestically, after weak reading of IIP data, the focus will now shift to CPI and trade balance data. “Overall the rupee may gradually head towards 72 mark in the short term,” he said.
Brent crude futures, the global oil benchmark, fell 0.19 percent to $58.46 per barrel.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was at 97.37.
Meanwhile, the 10-year government bond yield was at 6.53 percent on Tuesday.
Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 70.5185 and for rupee/euro at 78.9069. The reference rate for rupee/British pound was fixed at 85.6085 and for rupee/100 Japanese yen at 66.58.Rupee hits 6-month low of 71.40 against dollar, dives 62 paise on global turmoil