The rupee on Thursday took a hefty knock by plunging 23 paise to a two-week low of 64.53 a dollar after the US Federal Reserve delivered the widely expected rate hike and maintained a hawkish tone going forward.
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This is the lowest closing for the rupee since May 30, when it had finished at 64.66.
Forex market sentiment turned shaky as currency traders remained cautious, largely impacted by the interest rate hike by the US Fed and its hawkish view to trim balance sheet with one more rate hike during the year.
Firm dollar overseas along with sustained capital outflows further weighed on forex trade.
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Notwithstanding overnight developments, the rupee resumed higher at 64.26 against Wednesday’s closing value of 64.30 at the Interbank Foreign Exchange (Forex) Market on initial dollar selling and advanced further to 64.24.
The domestic unit relinquished its early gains to trade sharply lower towards the fag—end following fresh bouts of dollar demand from importers amid excess volatility.
After hitting an intra—day low of 64.54 in late afternoon deals, the domestic currency finally settled the day at 64.53, showing a steep loss of 23 paise, or 0.36 %.
It had gained a modest 3 paise yesterday.
Domestic bourses too encountered a volatile trading session as investors booked profits after a two-day winning streak with caution prevailing following a relatively hawkish Fed outcome.
Meanwhile, foreign funds sold shares worth a net Rs 161.13 crore yesterday, as per the provisional figures from stock exchanges.
Asian stock markets too ended mostly lower.
World crude prices tumbled to fresh 2017 low after EIA data showed lower-than-expected fall in US crude supplies.
The US central bank announced a rate hike of 25 basis points for the second time this year to a Fed Funds target range of 1.00 to 1.25 % and also reiterated its intention to start winding down its balance sheet in 2017, another sign of confidence in the outlook.
On the global front, the US dollar gained some ground against other major currencies ahead of key US macro data release later in the day and also the Bank of England’s policy decision.
The dollar index, which tracks the US currency against a basket of six major rivals, was sharply higher by 0.49 % at 97.39.
Meanwhile, GBP is faltering into the BOE meeting amid mounting political uncertainty in the UK.
In cross—currency trades, the rupee dropped further against the pound sterling to finish at 82.40 from 81.93 per pound and also fell back against the Japanese yen to end at 58.64 per 100 yens from 58.28 earlier.
However, it gained further ground against the euro to close at 72.00 from 72.06 yesterday.
In forward market today, premium for dollar showed a mixed trend.
The benchmark six—month premium payable in November edged down to 134—136 paise from 136—138 paise, while the far forward May 2018 contract ended stable 279—281 paise.
On the International commodity front, crude oil prices plunged to six—week lows on Thursday, reeling under pressure from high global inventories and also doubts about OPEC’s ability to implement agreed production cuts.
The brent crude fell 30 cents to $ 46.70 a barrel, before recovering a little ground to trade around USD 46.80 in early Asian trade.
Both crude oil benchmarks have lost all the gains made at the end of last year after the OPEC agreed with other big producers to cut output in an effort to prop up prices.