The rupee nosedived 62 paise to hit an over two-month low of 72.09 to the U.S. dollar on Wednesday as poor macro data and lingering worries over the U.S.-China trade war weighed on sentiment.
At the interbank foreign exchange, the rupee opened on a weak note at 71.75 against the U.S. dollar. As the day progressed, it crashed below the 72-level and touched the day’s low of 72.10. The Indian unit finally settled at 72.09, registering a fall of 62 paise over its previous close.
This is the lowest closing level for the rupee since September 4.
“Indian rupee fell for the third day in trot and heads for the biggest intra-day fall after September 16, amid contraction in industrial activity. India’s IIP fell 4.3% in September and is the lowest since October 2011,” said V.K. Sharma, head (PCG and Capital Markets Strategy), HDFC securities.
Amid signs of continuing weakness in the economy, India’s factory output shrank to the lowest level in eight years as all three broad-based sectors of capital goods production, consumer durables, and infrastructure and construction goods contracted.
The Index of Industrial Production (IIP) fell 4.3% in September as compared to a contraction by 1.4% in August 2019, and a growth of 4.6% in factory output in the same month a year back, data released by the Ministry of Statistics showed on Monday.
Further, a strong dollar overseas also brought the rupee under pressure, dealers said.
Continued unrest in Hong Kong led to weaker sentiment regionally, also impacting the mood in domestic equity and forex markets.
Further worsening sentiment, U.S. President Donald Trump dubbed China a cheater on trade even as he seeks an initial settlement to calm an 18-month trade war, adding to the uncertainty over the deal between the two countries.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose by 0.02% to 98.32.
However, global crude oil benchmark Brent Futures fell 1.18% to trade at $61.33 per barrel.
The 10-year government bond yield was down 0.52% at 6.53%.
On the equities front, the BSE Sensex ended 229.02 points, or 0.57%, lower at 40,116.06. Similarly, the broader NSE Nifty fell 73 points, or 0.61%, to end at 11,840.45.
Indian forex and bond markets were shut on Tuesday.
