The rupee fell for the third straight day on Thursday, breaching the key psychological 65 to the dollar mark as bearish bets on the currency continued to pile up after the devaluation of the Chinese yuan earlier this week.
The currency, which settled at a fresh two-year low of 65.10, has lost 1.38% over the last three days while the yuan has depreciated more than 2% over the last three days with the People’s Bank of China devaluing the currency both on Tuesday and Wednesday through a change in the methodology of setting the currency’s daily reference rate.
The fall dragged down most emerging market currencies and also the euro. The rupee’s fall was also accentuated on bets the Reserve Bank of India would cut policy rates ahead of the scheduled September 29 meeting on the back a sharp fall in retail inflation.
Data on Wednesday showed that in July Consumer Price Index inflation fell to 3.78%, from 5.40% a month earlier. Policy rate reductions render local assets less appealing to foreign investors as returns reduce and thereby could slow down dollar inflows.