Rupee crashses to over 2-month low of Rs 70.53

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Mumbai | Published: May 14, 2019 3:57:21 AM

The rupee on Monday closed at a two-month low of Rs 70.52 against the US dollar, a fall of 61 paise, or 0.88% over the previous close of Rs 69.71 on Friday.

Dealers said the fall in the rupee had been exacerbated by continuing outflows by the foreign portfolio investors (FPI) from the Indian capital markets.

The rupee on Monday closed at a two-month low of Rs 70.52 against the US dollar, a fall of 61 paise, or 0.88% over the previous close of Rs 69.71 on Friday.

The currency fell in sync with other currencies in the region as the trade war between the US and China intensified. The US has raised tariffs on $200 billion worth of Chinese imports to 25%.

The rupee closed at its lowest levels against the greenback since March 5, after hitting an intra-day low of Rs 70.54. “The currency markets are seeing risk averseness due to the trade war. Also, the dollar has strengthened and crude oil prices have gone up to $72,” a currency market dealer said.

Dealers said the value of the rupee in the NDF (non-deliverable forwards) or the offshore market had weakened and the weakness had been reflected in the local market price. The one-month forward rate of the rupee was 71.03. On Monday, the dollex was trading at 97.08 and the dollar was trading at 1.12 to the euro, up by 0.2%. Brent crude oil prices rose 1.5% to $71.68 per barell as Saudi Arabia said two of its oil tankers were attacked on Sunday.

Dealers said the fall in the rupee had been exacerbated by continuing outflows by the foreign portfolio investors (FPI) from the Indian capital markets. FPIs have pulled out nearly $1 billion from the debt markets over the past nine trading sessions while equity markets saw an outflow of nearly $650 million, reversing the previous three-month buying streak.

“There has been selling from the Indian capital markets, primarily due to growing uncertainties arising out of the US-China trade war and the results of the upcoming general election, which are affecting the rupee,” said MV Srinivasan, V-P, Mecklai Financial. “In addition, a lower industrial production number and poor corporate performance have added to the weaker sentiment,” Srinivasan added.

Furthermore, the downgrades by the credit rating agencies of the papers issues by non-banking financial companies (NBFCs) have aided the growing negative sentiment against the Indian debt markets. “The sentiment towards Indian debt markets has been negative as short-term papers of NBFCs bought by mutual funds will be maturing in the next few months,” said Devang Shah, deputy vice-president, Axis Mutual Fund.

FPIs pulled out close to $550 million in May (till May 9) from the bond market on the back of sales of $1.5 billion in April. In March, they had bought bonds worth $3 billion. The utilisation limit for gilts as on May 13 was 63.61%, while on May 10 it was 63.71%. The utilisation for corporate bonds was 69.17% on May 10.

FPIs pulled out $176 million from Indian equities on Friday and $150 million (provisional) on Monday, taking the outflow in the last nine sessions to $650 million. The Sensex has fallen 4.81% over the past nine trading sessions to close at 37,090 – a two-month low. The rupee has depreciated by nearly Rs 1.30 against the dollar over the last six trading sessions – from Rs 69.22 on May 3 to close at Rs 70.52 on Monday. The dollar index – which measures the value of the dollar against six currencies – fell by 0.03% at 97.29 from the previous close on Friday.

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