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Rupee Plummets to 18-Month Low Against US Dollar

Apprehensions remained on the fiscal front amid rising global crude prices that threaten to further raise India's import bill.

PTI

Updated:May 23, 2018, 10:45 PM IST
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Rupee Plummets to 18-Month Low Against US Dollar
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Mumbai: The rupee on Wednesday plummeted by a massive 38 paise to hit a near 18-month low of 68.42 against the US dollar following relentless capital outflows amid concerns over macro conditions and surging crude oil prices.

This is the lowest closing for the Indian currency since November 29, 2016, when it had ended at 68.65 a dollar. Apprehensions remained on the fiscal front amid rising global crude prices that threaten to further raise India's import bill.

Also, domestic forex market sentiment succumbed to bouts of pressure on revival of fresh global trade war fears after the US President Donald Trump tempered optimism over the progress made in the recent US-China trade talks.

Currency traders turned extremely cautious about possibility that the adverse US trade and monetary policy will have a substantial impact on the Indian economy. Minutes of the US Fed May meeting, due later today, will be closely scrutinised to assess how many more times the US central bank will raise interest rates in 2018.

The rapid surge in global crude oil prices has already had an adverse impact on India's import bill and can lead to a disbalance of the country's fiscal arithmetic. A massive selloffs in domestic equities which tumbled to multi-month lows further added to the rupee woes.

The beleaguered rupee had staged a mild recovery on Tuesday. In the meantime, global crude prices edged lower as the market took a breather on expectations that oil cartel OPEC may raise supplies in June, although geopolitical risks kept a floor under the market.

The Brent crude futures, an international benchmark, was trading lower at USD 79.16 a barrel in early Asian trade. Reversing a brief recovery trend, the rupee opened lower at 68.15 from Tuesday's close of 68.04 at the Interbank Foreign Exchange (forex) market.

The embattled domestic currency kept sliding in the face of heavy dollar demand and touched a fresh intra-day low of 68.46 in later afternoon deals before concluding at 68.42, revealing a sharp loss of 38 paise, or 0.56 per cent. The RBI, meanwhile, fixed the reference rate for the dollar at 68.2139 and for the euro at 80.2400.

Meanwhile, the yield on the benchmark 10-year government bond maturing in 2028 shot up to 7.85 per cent. Globally, the dollar edged higher versus a basket of currencies, with investors awaiting the minutes of the Federal Reserve's last policy meeting for hints on the pace of further US monetary tightening.

The dollar index, which measures the greenback's value against a basket of six major currencies was higher at 93.95. In the cross currency trade, the home currency bounced back against the pound sterling to settle at 91.14 per pound from 91.51 and also recovered against the euro to finish at 80.09 as compared to 80.34 yesterday.

However, it dropped further sharply against the Japanese yen to end at 62.35 per 100 yens from 61.34 earlier. Elsewhere, the euro and sterling were near five-month lows after disappointing economic data.

The euro was near a five-month low after private sector growth in the euro zone fell to its slowest pace in 18 months in May. In forward market today, premium for dollar moved up due to mild paying pressure from corporates.

The benchmark six-month forward premium payable in September inched up to 93.50-95.50 paise from 93-95 paise and the far-forward February 2019 contract edged up to 230-232 paise from 228-230 paise previously.

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