Rupee loses momentum gained so far on capital outflows fears, stock mayhem, says Forex

Unnerved by ferocious sell-off in the financial markets and heightened global currency volatility, the rupee ended at a fresh two-month low of 64.40 against the US dollar, wiping out all gains made this year so far.

Stamping its second straight week drubbing, the home currency depreciated by 34 paise, or 0.53 per cent. It has lost a staggering 85 paise in the two-week roller coaster ride.

A slew of distrubing macro-economic events including the brutal fall in global equity markets alongwith RBI policy outcome largely highlighted trading momentum. Frantic dollar demand from importers and banks in the midst of fresh foreign fund outflows predominantly weighed on the forex sentiment.

The panic-driven capitulation in domestic bourses following the spill-over from wobbly Asian markets also took its toll on currency market amid speculation that US Federal Reserve and other major central banks would act quicker to raise interest rates.

In the meantime, The Reserve Bank kept the interest rate unchanged as widely expected but lowered economic growth projection to 6.6 per cent for 2017-18 from 6.7 per cent on higher inflation expectations.

Although policy statement from the central bank calmed nervous bond market to some extent.

However, a sustained slide in crude oil prices and country's strong macro-economic fundamentals as well as abundant forex reserves limited further losses in the rupee.

Meanwhile, foreign investors signalled that it is kicking into reverse global buying spree against the grim backdrop of global market tumroil.

Foreign funds and overseas investors turned net sellers and sold shares worth USD 939.53 million during the week.

The rupee opend the week substantially lower at 64.20 from weekend close of 64.06 at the Interbank Foreign Exchange (forex) market due to sustained dollar pressure amid firm greenback overseas.

It later swung widely between 64.01 and 64.44 in the absence of any firm direction before ending the week at at 64.40, revealing a loss of 34 paise, or 0.53 per cent - the lowest closing since December 13, last year.

The RBI, meanwhile fixed the reference rate for the dollar at 64.3686 and for the euro at 78.8902.

In the meantime, country's foreign exchange reserves swelled by USD 4.12 billion to a new high of USD 421.914 billion on a healthy increase in the core currency assets and uptick in the gold stock, the RBI said.

In the international energy front, the rout in global crude prices remained unabated as a steep surge in U.S. crude output added to concerns about a global supply glut also impacted by higher production plan from the OPEE member Iran within the next four years.

Friday marked the biggest one-week plung since January 2016, and the worst daily fall since last July with Brent, the international benchmark crashing nealy 9 per cent on the week to close at USD 62.79.

On the global front, the American currency rebounded sharply to mark its strongest week against a basket of currencies in nearly 15 months as some traders piled into the greenback in a week of tremendous swings felt in stock and bond markets around the world.

The U.S. currency recovered further from a three-year low set two weeks agoas sentiment turned buoyant after the U.S. Senate approved a budget deal including stopgap government funding bill, which was too late to prevent a federal shutdown that was already underway.

The dollar index, which measures the greenback's value against a basket of six major currencies, was higher at 90.22 as against 88.69 last week.