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₹ tumbles by 67 paise as Govt moves disappoint

₹ tumbles by 67 paise as Govt moves disappoint

Mumbai: Breaking a strong two-day relief rally, the rupee plunged 67 paise to end at 72.51 against the US dollar after the government's confidence building measures to curb the currency volatility fell short of expectations.

It had closed at a one-week high of 71.84 in the last trading session.

The government Friday announced a slew of measures including a five-point plan to enhance foreign portfolio inflows and reduce imports with an aim to improve sentiments in the forex market.

But, it fell short of many investors' expectations, causing heavy sell-off and the local stocks to take a massive plunge.

Reversing a brief recovery trend, the rupee opened with a sharp 66 paise fall to 72.50 against the US dollar at the inter-bank foreign exchange (forex) market.

It quickly extended losses to hit a session low of 72.70, forcing RBI intervention in the currency market.

After scaling back to day's high of 72.30, the local unit finally ended at 72.51, revealing a steep loss of 67 paise, or 0.93 per cent.

The rupee enjoyed an exceptionally brisk pace of recovery momentum on the back of robust macro-economic data outcome amid talk of possible fiscal and monetary steps to stabilise the currency and comments from a government official that the slide was overdone.

It had managed to bounce back after the initial hardcore selling pressure, up 1.17 per cent in the two-day rally.

The local currency had hit a lifetime closing low of 72.69 against the US dollar and also touched an all-time intra day low of 72.92 last week.

Adding to pressure points, crude prices edged up from early losses despite assurances from Washington that Saudi Arabia, Russia and the United States can raise output fast enough to offset falling supplies from Iran and elsewhere.

Benchmark brent crude oil futures was up at USD 78.52 a barrel in early Asian trading.

The rupee has been one of the worst performing currencies in the emerging markets in the midst of global headwinds and concerns over the widening trade deficit on the back of rising oil prices.

The benchmark 10-year sovereign yield, however, eased to 8.10 per cent.

The financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 72.5505 and for the euro at 84.3985.

In the meantime, forex reserves drifted below the USD 400-billion mark for the first time in over a year - declining by USD 819.5 million to USD 399.282 billion for the week to September 7, RBI data showed.

This is the second consecutive week of major fall in the reserves, which indicates that the central bank has been selling the greenback to stem the currency's collapse.

While foreign investors and funds pulled out a massive Rs 9,400 crore (USD 1.3 billion) from the capital markets last fortnight, after putting in money during the previous two months on hardening concerns over the risk of twin deficits due to a surging crude prices and falling rupee.

On the global front, the dollar gave up early gains and slipped against its major trading rivals due to sluggish weekend macro data.

Most emerging market currencies also dropped nearly half a per cent as investors waited for the next salvo in the trade war between the US and China.

US President Donald Trump is likely to announce new tariffs on about USD200 billion of Chinese imports as early as Monday.

PTI

PTI

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