Mumbai: The Indian rupee on Friday weakened to a fresh two-month low against US dollar after fears of higher interest rates by the Federal Reserve led to a fresh plunge in global markets.
The rupee opened at 64.42 a dollar and touched a low of 64.43, a level last seen on 18 December. At 9.15am, the rupee was trading at 64.38, down 0.21% from its Thursday’s close of 64.26.
Traders were cautious after 10-year US bond yield climbed to almost 2.9%, a key indicator of inflationary pressure and the likelihood of higher interest rates. Analysts expect that it could hit 3% in the coming days.
Global markets started falling this week after strong US jobs data grew at a fast rate in January. It is good for the economy, analysts believe, but worry that it may hurt corporate profits and that rising wages are a sign of faster inflation which may prompt the Federal Reserve to raise interest rates at a faster pace.
Also, strong signal from the Bank of England that an interest rate increase was on the way added to expectations that the world’s major central banks were now firmly on course to wind down the emergency stimulus.
The benchmark Sensex index fell 1.08% or 370.24 points to 34,042.92. So far this year, it has fallen 1%.
So far this year, the rupee has fallen 0.6%, while foreign investors bought $1.83 billion and $2.07 billion in local equity and debt markets, respectively.
Bond yield fell for the fourth session after international crude oil prices declined. The 10-year bond yield was trading at 7.454% compared to its previous close of 7.53%. Bond yields and prices move in opposite directions.
Asian currencies were trading lower. South Korean won was down 0.38%, Malaysian ringgit 0.28%, Indonesian rupiah 0.27%, Japanese yen 0.24%, Taiwan dollar 0.19%, Philippines peso 0.16% and Singapore dollar 0.06%. However, China offshore was up 0.23%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 90.246, up 0.02% from its previous close of 90.229.
Bloomberg contributed to the story