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Rupee Nosedives to 68 After 2-day Gains, Down 30 Paise

The rupee selloffs accelerated last week against the grim backdrop of surging global crude prices and growing concerns over widening twin deficits even as foreign investors reduced their rupee-dominated exposures.

PTI

Updated:May 18, 2018, 8:45 PM IST
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Rupee Nosedives to 68 After 2-day Gains, Down 30 Paise
Representative image.
Mumbai: After a brief respite, the rupee once again turned shaky and plunged by 30 paise to end at a fresh 16-month low of 68 against the US currency on renewed dollar buying interest amid global macro challenges.

The forex sentiment wobbled after the crude prices broke the psychological threshold of USD 80 a barrel - spurring a fresh wave of dollar demand from state-run oil marketing companies fearing a further depreciation in rupee value.

Traders also reported hedging-related demand as importers rushed to pay forward premium, putting additional pressure on the local currency.

The rupee selloffs accelerated last week against the grim backdrop of surging global crude prices and growing concerns over widening twin deficits even as foreign investors reduced their rupee-dominated exposures.

The home currency had recovered 37 paise in the last two days after hitting a low of 68.15 on Tuesday.

Massive capital outflows have largely contributed to declines despite a series of measures taken by the RBI and authorities.

Reversing its recovery momentum, the rupee opened weak at 67.78 from Thursday's close of 67.70 at the Interbank Foreign Exchange (forex) market.

Being engulfed in selling pressure, the local unit subsequently hit a low of 68.07 in mid-afternoon deals before regaining some lost ground as state-run banks sold the greenback likely on behalf of the central bank.

It finally settled at 68.00, revealing a steep loss of 30 paise, or 0.44 per cent.

For the week, the Indian currency lost another 67 paise against the USD - stretching the fall to six-straight week.

The RBI, meanwhile, fixed the reference rate for the dollar at 67.9577 and for the euro at 80.2784.

The rupee is Asia's worst performing currency this year on concerns that slowing capital flows and a wider trade deficit could stretch the funding of India's current account gap.

On the energy front, the brent crude continues to edge higher after topping USD 80 a barrel on Thursday impacted by Middle East tensions and signs that global stockpiles continue to decrease.

The Brent crude futures, an international benchmark, was trading higher at USD 79.60 a barrel in early Asian trade.

Meanwhile, D-street took investors on a turbulent ride as key benchmark indexes veered into a steep slide that knocked 300 points off the Sensex, while the broader NSE Nifty cracked below the 10,600-mark.

The dollar index, which measures the greenback's value against a basket of six major currencies, was higher at 93.53.

Globally, the greenback traded little changed against its major trading rivals. The US Treasury market eased a bit on Friday during the European session after the benchmark 10-year Treasury yield rose to 3.13% overnight, its highest level since 2011.

In the cross currency trade, the rupee retreated against the pound sterling to end at 91.69 per pound from 91.31 and drifted back against the euro to finish at 80.08 from 79.79.

It also fell back against the Japanese Yen to close at 61.27 per 100 yens as compared to 61.21 earlier.

Elsewhere, the common currency, euro is consolidating just above its 2018 lows against the resurgent greenback amid fading political uncertainty after the 5-Star movement leader

Di Maio confirmed agreement on a government contract with the League party.

While, the British pound edged lower as investors now seemed to have digested the latest Brexit headline that the UK is prepared to stay in the customs union beyond 2021.

In forward market today, the premium for dollar continued to fall on the back of sustained receiving from exporters.

The benchmark six-month forward premium payable in September eased to 93-94 paise from 93.25-95.25 paise and the from 227-229 paise previously.

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