Rupee slips 62 paise to two-month low

Money matters: Moody’s outlook revision, IIP numbers and lowering of GDP forecast are seen as catalysts. V.V. Krishnan

Money matters: Moody’s outlook revision, IIP numbers and lowering of GDP forecast are seen as catalysts. V.V. Krishnan  

In the absence of RBI’s intervention, the currency could drop to 72.50 levels, dealers say

The rupee weakened 62 paisa, or 0.9%, against the dollar on Wednesday amid weak macro economic data, with traders unwinding their speculative positions.

The rupee opened at 71.75 against the U.S. dollar and went on to weaken further to touch the day’s low of 72.10 before closing at 72.09 a dollar, down 62 paise over its previous close.

This is the lowest closing level for the rupee since September 4. “Today, it was purely speculative unwinding which happened. Rupee is the most preferred currency for carry trade in Asia. The speculators were holding sizeable long position in the rupee, offshore as well as onshore market,” said Anindya Banerjee, currency strategist, Kotak Securities.

“The macro backdrop has been worsening for sometime now. May be the Moody’s outlook revision and subsequent IIP numbers, lowering of GDP forecast acted as catalysts,” he said. Last week, rating agency Moody’s revised the outlook for the country to negative from stable. Data released earlier this week showed the Index for Industrial Production contracted 4.3% in September, leading to many economists cutting the country’s GDP forecast for the current financial year to 5% or below.

Currency dealers said the central bank was absent from the currency market today and once the 71.40 level was breached, there was no supply of dollar in the market, which took the rupee down. In the absence of intervention from the central bank, the rupee could drop to 72.50 levels, dealers said.

The on-going trade tensions between U.S. and China also impacted sentiments in the currency market.

The effect of the weak domestic macro data was visible in the stock market as well, with the benchmark Sensex shedding 229 points, or 0.57%, to close at 40,116.06. The broader Nifty lost 73 points 0.61% to close at 11,840.45.

Stocks lose ground

On the BSE, more than 1,600 stocks lost ground versus less than 1,000 gainers. All the broader indices and almost all the sectoral indices ended the day in the red.

An overall weak trend in global markets on account of unrest in Hong Kong and concerns over the U.S.-China trade talks also acted as a catalyst in affecting investor sentiment. Benchmarks of Hong Kong, South Korea, Japan, Taiwan, China, Philippines, Singapore and Indonesia all lost ground on Wednesday.

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Printable version | Jul 11, 2020 8:07:42 AM |

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