Rupee weakens to 6-month low of 65.10 on heavy dollar buying

US Federal Reserve reaffirmed its intention to hike rates in December

Press Trust of India  |  Mumbai 

Rupee
RBI fixed the reference rate for the dollar at 64.8357 and for the euro at 77.3036.

The on Monday suffered a yet another blow to plunge by a whopping 31 paise at a fresh six-month low of 65.10 a after heavy buying of the and concerns on the macroeconomic front.

This was the weakest closing for the home currency since March 24, when it had ended at 65.41 against the greenback.


Besides panic buying by corporates and importers, fears over fund outflows from domestic capital market led to weakened market sentiment against the backdrop of imminent and unwinding of its stimulus measures amid unsupportive global factors.

The reaffirmed its intention to hike rates in December and normalising its crisis-era stimulus programme into reverse from next month last week and since then the has been under pressure.

Hardening speculation of widening fiscal deficit after the government indicated a stimulus package meant to jump-start the nation's ailing economy put trading mood into further disarray.

The expansion hit a three-year low of 5.7 per cent in the April-June quarter with India losing the fastest-growing economy tag to China for the second straight quarter.

Besides falling growth rate, exports are facing strong headwinds and the industrial expansion hit the lowest in five years.

There is an increased speculation over a possible fiscal stimulus which can go above Rs 40,000 crore after six successive quarters of a dip in the economic growth.

Foreign investors and funds remained in exit mode as they have pulled out nearly Rs 5,500 crore from local equities so far this month due to geopolitical concerns and a tendency to take profit.

The domestic currency got hammered last week, depreciating by a steep 71 paise against the US - the biggest since November 2016.

In the meantime, country's foreign exchange (forex) reserves surged by $1,782.5 million as on September 15, according to the latest data. Total reserves were $402.5 billion, against $400.726 billion in the previous week.

Domestic bourses endured panic sell-offs for the second straight session as risk aversion dominated trading sentiment with North Korea and the US engaging in war of words.

Panic unwinding sent the flagship tumbling by a whopping 296 points to end at 31,626.63, while Nifty crumbled over 91 points to 9,872.60.

In line with the dominant bearish trend, the opened on a weak note at 64.84 from weekend close of 64.79 at the Interbank Foreign Exchange (Forex) market on sustained demand.

But, more quickly than expected, it bounced backed with renewed strength to touch a high of 64.72 on easing pressure.

However, wiping out all mid-afternoon gains, the local currency retreated sharply to breach the key significant 65-mark to hit a fresh intra-day low of 65.19 before ending at 65.10, showing a steep loss of 31 paise, or 0.48 per cent.

It had clawed back some of its lost ground from its near 6-month low and ended a marginal 2 paise higher at 64.79.

The RBI, meanwhile, fixed the reference rate for the at 64.8357 and for the euro at 77.3036.

On the global front, the extended gains against other major currencies, following upbeat remarks by New York Federal Reserve President William Dudley that the Fed is on track to gradually raise interest rates given factors depressing inflation are "fading" and the US economy's fundamentals are sound.

The index, which measures the greenback's value against a basket of six major currencies, was marginally weak at 92.33.

In cross-currency trade, the staged a smart rebound against the pound sterling to finish at 87.77 from 87.91 per pound and also recovered against the euro to end at 77.30 from 77.65 last Friday.

The local unit, however, remained subdued against the Japanese yen and settled at 58.05 per 100 yens from 57.85 earlier.

In forwarding market today, the premium for turned soft owing to mild receivings from exporters.

The benchmark six-month premium payable in February softened to 112-114 paise from 113.25-115.25 and the far forward August 2018 contract also ended marginally weak at 250-252 paise from 251.50-253.50 paise.

On the International energy front, crude prices rose on Monday to their highest in nearly nine months after major producers said at a meeting in Vienna the global market was well on its way towards rebalancing.

The November Brent contract was up 75 cents, or 1.3 per cent, at $57.61 a barrel in early Asian trade. Brent earlier hit its highest level since January 3 and was trading within a of its 2017 high of $58.37.

US crude for November delivery was down 36 cents at $51.02, hitting a fresh four-month high.

First Published: Mon, September 25 2017. 20:36 IST