Rupee slides to over 6-week low on forex outflows amid growth, COVID-19 concerns

Mumbai, June 15

The rupee depreciated by 19 paise to close at a more than the six-week low of 76.03 on Monday as weak domestic equities and sustained foreign fund outflows weighed on investor sentiment.

Forex traders said risk appetite has waned amid concerns over the second wave of COVID-19 globally.

The rupee opened weak at 75.93 at the interbank forex market. It fell further and finally settled lower by 19 paise at 76.03 against the US dollar, a level not seen since April 28.

It had settled at 75.84 against the US dollar on Friday.

“Fears of the second wave of the COVID-19 infections in China sent investors scurrying for safe-havens,” Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities said.

China, on Monday, reported 49 new cases raising concerns of the second wave of coronavirus infections striking.

India saw a jump of over 11,000 cases for the third consecutive day on Monday, taking the total number of infections to over 3.32 lakh.

Indian stocks also crashed over 1.6 per cent in line with global selloffs.

The BSE Sensex tanked 552.09 points or 1.63 points to close at 33,228.80. The NSE Nifty tumbled 159.20 points or 1.60 per cent to settle at 9,813.70.

Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs 1,311.49 crore on Friday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, fell 0.85 per cent to USD 38.40 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.13 per cent to 97.19.

Forex traders said the decline in the local currency was largely due to weakness in domestic as well as global equities and marginal strength in the dollar against its major crosses.

“Weakness in the currency also accelerated after IIP data released last weekend came in weaker-than-expectation,” Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services said, adding that “in the next couple of sessions we expect momentum for the rupee (Spot) to remain weak and quote in the range of 75.80 and 76.40.”

Market participants said the Indian rupee dropped in line with Asian peers as a second wave of COVID-19 infection in many countries added to investor concerns.

“The dollar index saw a sharp rise after trade on Friday, which has led to pressure building on the rupee over the weekend. India rupee closed at 76.03, the weakest level after April 28, 2020,” said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.

Meanwhile, wholesale prices in the country witnessed deflation of 3.21 per cent in May due to a sharp decline in prices of fuel and power, even as food articles turned expensive.

Vakil further said the rupee managed to limit the losses, amid higher forex reserves and strong foreign fund inflows. So far this month, foreign funds bought equities worth USD 2.87 billion and sold USD 290 million worth securities in the debt market, he added.

Meanwhile, the Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.9730 and for rupee/euro at 85.8692. The reference rate for rupee/British pound was fixed at 95.5649 and for rupee/100 Japanese yen at 70.89. PTI

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