The Indian rupee on Wednesday erased all the morning gains against US dollar in the afternoon deals and crashed further to a fresh all-time low of 71.96 after August services PMI eased from the 21-month high. The rupee plunged as much as 40 paise vs USD to a fresh record low of 71.9650, the Bloomberg data showed. The rupee was just three-and-half paise away from hitting 72 per US dollar mark. At an all-time low of 71.650, the rupee has plunged by 13.79% in the last one year from a level of 63.2463.
The rupee recovered slightly in the opening trade on Wednesday to 71.3862 against US dollar, up by 18 paise from the previous closing of 71.5650 but failed to sustain the gains and went into losses after 10:15 pm. The rupee extended losses after August services PMI data was released at 10:30 am. The FBIL (Financial Benchmarks India Ltd) fixed rupee’s reference rate at 71.7533 against US dollar on Wednesday, 5 September 2018.
The rupee has been the worst performing currency among the Asian peers and has slumped more than 13% in the current year so far against the US dollar from a level of 63.67 per unit US dollar to 71.96 per US dollar.
According to a Bloomberg report, more than $3 billion of foreign portfolio investments has moved out in the April-June period following the weak rupee against US dollar and the expectations of a faster-than-anticipated pace of monetary tightening by the US Federal Reserve.
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The domestic forex market sentiments remained weak on the back of elevated crude oil prices, worries over capital outflows after AMRI (Asset Managers’ Roundtable of India) indicated that India’s stock markets and domestic currency (rupee) may tumble following the KYC circular issued by SEBI (Securities and Exchange Board of India) and the US-China trade tariff deadline due today in which Trump administration is set to impose fresh tariffs on about $200 billion worth of Chinese goods.
Earlier last week, a massive depreciation was seen in rupee to dollar value after the Reserve Bank of India released its annual report which showed a mixed picture of the Indian economy. The Reserve Bank of India (RBI) in its Annual Report 2017-2018 hinted towards upside risks in the headline inflation over the rest of the year, the ‘heavy’ impact of changing demand-supply dynamics in the international crude oil markets on India’s trade deficit and current account deficit being largely financed by FDI inflows.
Among the major macroeconomic data to be released later this month, CPI inflation and current account deficit are due on 12 and 13 September 2018, respectively. The April-June quarter CAD (current account deficit) widened to 2.6% of GDP (gross domestic product), which is highest in four-and-half-years. Earlier last week itself, India’s foreign exchange reserves soared to $401.29 billion from $400.85 as of 24 August 2018.