Markets

Rupee recovery stalls on fresh dollar demand, plunges 29 paise

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Halting its three-day rally, the rupee took a severe beating today and ended sharply lower by 29 paise at 68.13 against the U.S. currency due to month-end demand for the American unit from importers and banks.

The domestic currency remained under pressure as fears of a escalating trade conflict between U.S. and China ratcheted up another notch following Trumps latest threat aiming at Chinese investments — a move which could have great long-term consequences on the U.S.-Sino economic ties.

The simmering trade dispute between the U.S. and its major trading partners remains a critical issue for global markets.

The selloffs in domestic equities alongside heavy capital outflows further dampened traders confidence in a big way.

Foreign investors and funds pulled out over ₹14,500 crore from the Indian capital markets this month so far, primarily due to global trade war and hawkish commentary by the U.S. Federal Reserve.

The latest outflow has taken the total net withdrawal by foreign portfolio investors (FPIs) from the capital markets (equity and debt) to more than ₹46,600 crore in this year so far, according to the latest data available with the depositories.

A sharp pull back in crude prices after the OPEC cartel agreed to raise production levels last week even failed to enthuse forex traders.

The Indian rupee swung between 67.90 and 68.17 most part of the day.

In the meantime, country’s foreign exchange reserves declined by $3.039 billion to $410.070 billion in the week to June 15 due to fall in foreign currency assets, RBI data showed.

On the energy front, global crude prices retreated sharply as investors prepared for an extra 1 million barrels per day (bpd) in output to hit the markets after OPEC and its partners agreed to raise production that was agreed at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna on Friday.

Brent crude futures, an international benchmark, is trading down at $74.56 a barrel, in early Asian trade.

Though, the bond market also witnessed selling pressure, the 10-year benchmark bond yield held steady at 7.82%.

At the interbank foreign exchange (Forex) market, the Indian currency opened lower at 68.00 from weekend close of 67.84.

It lost momentum and drifted further in late afternoon deals, dragged by oil importers month-end greenback demand.

After plunging to session low of 68.17 towards the tail-end, the rupee finally ended at 68.13, showing a steep loss of 29 paise, or 0.43%.

Over the last week, the rupee had rebounded by 17 paise after hitting fresh one-month low.

The RBI, meanwhile, fixed the reference rate for the dollar at 68.1466 and for the euro at 79.3499.

The dollar index, which measures the greenback’s value against basket of six major currencies, was down at 94.00.

The dollar traded higher against its major rivals buoyed by positive comments from U.S. Federal Reserve Chairman Jerome Powell that the Fed should continue with a gradual pace of interest rate hikes to balance its employment and inflation goals.

In the cross currency trade, the rupee lost further ground against the pound sterling to finish at 90.41 per pound from 90.08 and remained weak against the euro to end at 79.58 as compared to 78.96.

It also fell further against the Japanese yen to close at 62.16 per 100 yens from 61.59 last Friday.

Elsewhere, the shared currency euro found some support against the greenback earlier in the session after German business confidence came within expectations despite ongoing friction between the EU and the Trump administration.

The British Pound, however is trading marginally down against the U.S. Dollar after the survey of European business leaders showed that Brexit uncertainty weighs on their investment decisions in the UK.

In forward market on June 25, premium for dollar showed a mixed trend due to lack of market moving factors.

The benchmark six-month forward premium payable in October softened to 99.75-101.75 paise from 100-102 paise, while the far-forward April 2019 contract edged up to 247-249 paise from 245-247 paise previously.

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Printable version | Dec 16, 2019 12:34:24 AM | https://www.thehindu.com/business/markets/rupee-recovery-stalls-on-fresh-dollar-demand-plunges-29-paise/article24255244.ece

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