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The rupee was weighed down on Friday due to the dollar gaining strength globally and sustained greenback purchases by foreign investors, who continued to press the sell button in the Indian equity market in the wake of the US Fed rate hike.
The currency slumped about 66 paise to close at 76.9150 per dollar against the previous close of 76.25. This is the lowest closing level for rupee in over two months. Though there was a mild central bank intervention in the market, the direction was towards depreciation of the Indian unit.
Weaker days ahead
RK Gurumurthy, Head-Treasury, Dhanlaxmi Bank, said: “The rupee weakened due to a couple of factors. Firstly, the most widely followed representative dollar index rose to a two decade high, which translated into a broader all-currency weakness. Secondly, stock indices in US suffered massive losses yesterday — the spillover effect of which saw Asian indices selling off, leading to home currency weakness.”
With crude prices also staying at elevated levels, the correlating factors for rupee’s movements supported a weakening trend, he added.
Gurumurthy said the overall trend suggests a weaker rupee in the days ahead with heightened volatility.
IFA Global, in a report, noted that the USD-INR pair rose as rapid shifts towards higher interest rates by major central banks across the globe soured the outlook on emerging market assets, wreaking havoc on domestic equity and bond markets. The stronger dollar globally and elevated crude prices also dented the sentiment for the rupee, per the report.
Bond yields under pressure
Meanwhile, Government Securities (G-Sec) continued to reel under the impact of the Reserve Bank of India’s off-cycle 40 basis points hike in the repo rate. Price of the 10-year benchmark G-Sec (coupon rate: 6.54per cent) declined 31 paise to close at ₹93.78 (previous close: ₹94.09). Yield of this security rose about 5 basis points to close at 7.4507 per cent (7.4028 per cent).
Price of the widely traded 13-year G-Sec (coupon rate: 6.67 per cent) fell about 51 paise to close at ₹91.87 (previous close: ₹92.3825). Yield of this security rose about 6 basis points to close at 7.6404 per cent (7.5754 per cent).
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