The rupee today plummeted by a whopping 30 paise to close at an over one-month low of 64.88 against the US dollar due to fresh demand for the American currency from importers. This is the lowest close for the home currency since May 23, when it had ended at 64.89 against the US dollar. The implementation of the Goods and Services Tax (GST) too spelt worries that the new indirect tax regime could bring some renewed upturn in inflation and may impact the economic growth, a forex dealer commented.
A spectacular rally in local equities even failed to arrest the rupee slide even as investors keenly awaited minutes from the Federal Open Market Committee’s June meeting, he added. A firming dollar overseas at the beginning of the week also weighed heavily on forex sentiment.
The GST — India’s biggest tax reform since Independence — came into force on July 1. The home currency, however, scripted its best first-half of a year performance since 2015. At the Interbank Foreign Exchange (Forex) Market, the local unit resumed substantially lower at 64.65 as compared to the weekend close of 64.58 on bouts of dollar demand. It remained under immense pressure throughout the day and drifted sharply to hit a fresh intra-day low of 64.90 in late afternoon deals before ending at 64.88, showing a steep loss of 30 paise, or 0.46 per cent.
Foreign investors have pumped over Rs 29,000 crore in the country’s capital market in June, making it the highest inflow in three months, enthused by better earnings outcome and also forecast of a normal monsoon.
In the meantime, country’s forex reserves surged by USD 576.4 million to touch a new life-time high of USD 382.53 billion in the week to June 23, helped by a rise in foreign currency assets (FCAs). The RBI, meanwhile, fixed the reference rate for the dollar at 64.7525 and for the euro at 73.8567.
On the global front, the greenback held onto gains against the other major currencies on Monday, but gains were limited amid expectations for tighter monetary policy by major central banks. The dollar index, which tracks the US currency against a basket of six major rivals, was up at 95.79.
In cross-currency trades, the rupee retreated against the pound sterling to settle at 84.03 from 83.79 per pound and dropped further against the euro to settle at 73.77 from 73.69 earlier. But, it recovered against the Japanese yen to finish at 57.40 per 100 Yen from 57.68.
In the forward market today, the premium for dollar showed modest rebound. The benchmark six-month premium payable in December edged up to 146-148 paise from 145.25-147.25 paise and the far forward June 2018 contract moved up to 293-295 paise from 290-292 paise on last Friday.
On the International commodity front, crude prices rose for an eighth day to post their longest rally in over five years after data pointed to moderating US output. The Brent crude futures climbed 13 cents to USD 48.90 per barrel in early Asian trade. Crude prices hit a 10-month low last week in the face of a mounting supply glut.