The Indian rupee (INR) today weakened sharply against the US dollar, falling to the year’s lowest level against the greenback. A broad dollar strength, weak equity markets and outflows from Indian capital markets hurt the rupee. Opening flat at 71.55 against the US dollar, the rupee fell to 71.98 at its day’s low. On Wednesday, the rupee had closed at 71.55 against the US dollar. Indian stocks markets also fell sharply today, with Sensex settling nearly 600 points lower.
Here are 5 things to know about rupee vs USD dollar trade today:
1) Huge outflows from Indian equity markets over the last two months have weighed on the rupee. FPIs have withdrawn over $3 billion from Indian markets in the past two months after the government hiked tax on super-rich in the Budget. Indian market regulator Sebi on Thursday had eased norms for FPI (foreign portfolio investor) registration and relaxed certain criteria for FPI classification. Despite these measures, Indian equity markets fell sharply today, with Sensex tumbling nearly 600 points.
Indian equity market index Nifty is down about 10% from its June highs. A slowing economy and outflows from foreign investors have hurt investor sentiment.
2) The US dollar had bounced overnight to 98.30 against a basket of currencies from a low of 97.94. This followed the release of the minutes of the US Federal Reserve's July meeting which showed policymakers were deeply divided over whether to cut interest rates. “Fed minutes were hawkish. Most members thought of the cut as an insurance cut or a mid-cycle policy adjustment rather than the beginning of a new rate cut cycle," forex advisory firm IFA Global said in a note.
3) Higher also price also weighed on the rupee. Oil prices have steadied above $60 a barrel, supported by a drop in U.S. crude inventories and OPEC-led supply cuts, although worries about the global economy weighed. Overall this year, Brent prices are 12% this year, supported by supply cuts led by the Organization of the Petroleum Exporting Countries, and export cuts in Iran and Venezuela which are under US sanctions. Higher oil prices widens India’s trade deficit and puts pressure on rupee. Analysts say that India’s trade deficit, which narrowed in July due to lower largely due to lower oil and gold imports, may rise in coming months as gold and oil imports normalise.
4) Rupee traders next focus will be now on US Fed chief Jerome Powell's speech at Jackson Hole, scheduled for tomorrow, and G7 meet in France over the weekend. Jackson Hole symposium of central bankers starts today. ECB meeting minutes and US weekly jobless claims data also due today.
5) Elsewhere, today China's yuan fell to fresh 11-year lows against the US dollar today amid worries about the deepening China-US trade war. (With Agency Inputs)