The Indian rupee on Wednesday weakened past the important level of 68.50 against the US dollar. The rupee plunged by 30 paise to hit a 19-month low of 68.54 against the US dollar in early trade on Wednesday. This is the rupee’s lowest level against the US dollar since 29 November, 2016. On Tuesday, the rupee lost 11 paise to end at 68.24 against the US currency. The domestic stock markets were also weak, with the Sensex down around 100 points. Here are 5 things to know about rupee’s fall on Wednesday:
Apart from a rise in crude prices, month-end dollar demand from importers and banks amid sustained foreign capital outflows contributed to the rupee’s weakness, say traders.
Global oil prices jumped rose today as the US pressed its allies to end all imports of Iranian oil by a November deadline. Brent climbed 17 cents to $76.48 a barrel.
Continued selling by foreign investors in local equity and debt market has hurt the rupee, which is down nearly 7% this year. So far this year, foreign investors have sold nearly a combined of $7 billion in equity and debt markets.
“Risk sentiment continues to remain fragile on trade-war related tensions. Crude has spiked up as output post OPEC is not likely to increase as much as the market had anticipated. Asian currencies trading weaker against US dollar,” forex advisory firm IFA global said in a note.
Global bank Barclays Plc expects the rupee to decline to 72 per dollar by year-end as elevated oil prices dents government finances and foreigners dump Indian assets. Barclays’ earlier forecast was 69 per dollar. “India’s difficulty in attracting portfolio flows is exacerbated by poor bond market, unclear policy communication by the Reserve Bank of India and rising political risks ahead of the 2019 election,” analysts Hamish Pepper and Dennis Tan wrote in a recent note.