Rupee falls to over three-week lows led by decline in Chinese Yuan

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Mumbai | Published: October 15, 2019 2:29:03 AM

Oil prices had soared to a four -month high in mid-September after a drone attack on a Saudi Aramco facility. A few days back, Iran blamed Saudi Arabia for an attack on its oil tanker.

rupee, dollar, commodity market, rupee rate, rupee rate, rupee rate, market rateThe rupee, which rose to as high as 70.75 against the greenback on Monday morning, fell to levels of 71.228 during the second half of the session, Bloomberg data showed.

The rupee fell by 21 paise to 71.225 against the dollar on Monday, primarily led by a decline in the Chinese yuan after reports indicated that China wants more time to finalise details of the first phase of the trade deal with the US. This is the lowest level seen by the currency in over three weeks.

According to Bloomberg, Beijing is likely to send a delegation to finalise a written deal that could be signed by the Presidents of the two countries at the Asia-Pacific Economic Cooperation summit next month in Chile. The report indicated that China wants Trump to scrap a planned tariff hike in December in addition to the hike scheduled for this week, something the administration hasn’t yet endorsed.

The rupee, which rose to as high as 70.75 against the greenback on Monday morning, fell to levels of 71.228 during the second half of the session, Bloomberg data showed. It is noteworthy that the closing level of the rupee on Monday was very close to its intraday low.

rupee, dollar, commodity market

MV Srinivasan, vice-president at Mecklai Financial Services, said the Chinese seem to have cast a bit of doubt on the trade deal following which there was a correction in the yuan.

“This pulled down some of the Asian currencies which had an impact on the rupee as well. I expect the currency to remain range bound in the near term between 70.50 and 71.50 against the dollar in the foreseeable future.
Going further, situation in the Middle East will also have a crucial effect on the currency as tensions persist between Saudi Arabia and Iran,” Srinivasan said.

Oil prices had soared to a four -month high in mid-September after a drone attack on a Saudi Aramco facility. A few days back, Iran blamed Saudi Arabia for an attack on its oil tanker.

The rupee has depreciated by about 2% since the beginning of the year. The dollar index, which tracks the strength of the US dollar against a basket of currencies, was trading at 98.475 on Monday evening, having come down from its 16-month-high levels of 99.377 during the end of September.

Meanwhile, foreign portfolio investors (FPIs) have remained net sellers of Indian debt and equity in October, according to Bloomberg data.

FPIs have sold $655.90 million worth of equities in October while they sold $131 million of Indian debt on a net basis this month.

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