Rupee plunges to 72 against US dollar for the first time in 2019

Extending its downfall, the rupee on Friday plunged to 72 against US dollar, down 19 paise against its previous close in the early morning trade. The currency was set for the biggest monthy fall in six years. In August alone, it has plunged 4.6 per cent while so far in 2019, it has lost 3.9 per cent, as per TV reports. 

The domestic currency on Thursday crashed to an over eight-month low of 71.81, dropping 26 paise as tumbling equities and incessant foreign fund outflows weighed on sentiment.

The sudden drop in Chinese yuan also led to increased volatility in emerging market currencies, including the rupee, forex dealers said.

Meanwhile, foreign investors pulled out Rs 902.99 crore from Indian equities on Thursday, as per exchange data.

The Indian rupee’s outperformance against more export-dependent currencies such as the Korean won has likely come to an end, with JPMorgan Chase & Co. seeing risks shifting to the downside, said a recent Bloomberg report. 

The weaker outlook for the rupee is linked to waning internal and external growth, it being overvalued in real effective exchange rate terms, and to an easing in the tailwind of falling US real rates, Bloomberg quoted Jonathan Cavenagh, head of JPMorgan’s foreign-exchange strategy for emerging markets Asia, as saying.

That apart, Madan Sabnavis, Chief Economist at Care Ratings, in a recent column, wrote," Going ahead, depreciation of between 3-4 per cent for the year could be expected though global factors would continue to weigh heavily on the currency as well as FPI flows." CLICK TO READ FULL ARTICLE

Today, the focus will be on Fed Chairman comments at the Jackson Hole Symposium. He is likely to nod to the possibility that trade tensions, which have escalated may worsen a global economic slowdown and ultimately make more US rate cuts necessary, said Gaurang Somaiya, Research Analyst (Currency) at Motilal Oswal Financial Services (MOFSL). "The USD/INR pair on Friday is expected to quote in the range of 71.80 and 72.50," Somaiya added. 

On the global front, Asian shares struggled to make any headway on Friday as weak US manufacturing activity and uncertainty over how much further the Federal Reserve would cut rates added to the general air of caution in markets buffeted by global growth fears. MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.1 per cent lower, though it was up 0.6 per cent for the week and on track to break a four-week losing streak, said a Reuters report. 

In the commodity market, oil prices weakened overnight, with both Brent crude and US West Texas Intermediate down 0.6 per cent each, on worries about the global economy. In the currency market, the greenback slipped on Thursday, but moved within narrow ranges and in early Asian trading, the dollar was up 0.1 per cent against a basket of major currencies to 98.249, the Reuters report added. 

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel