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Rupee nosedives to another new low of 71.79 against US dollar
The Indian rupee continued to lose its value on Wednesday, falling to a record low of 71.79 against the US dollar.
Rupee nosedives to another new low of 71.79 against US dollar

The Indian rupee continued to lose its value on Wednesday, paring initial gains to drop to a fresh all-time low of 71.79 against the US dollar. Today's fall was due to sudden bouts of dollar-buying by banks and importers.

This was the sixth consecutive sessions when the rupee fell. Earlier, the rupee resumed higher at 71.43 against yesterday's closing level of 71.58 a dollar at the interbank foreign exchange market.

The Indian unit was trading on a volatile note, moving in a wide range quoting between 71.40 and 71.79 during morning deals.

"Rupee's speculative demand is causing volatility amid crisis in the emerging market currencies and consistent rise in the crude oil prices," a dealer said.

The dollar strengthened against a basket of currencies overseas as the US economy continued to exhibit strength amid a lingering threat of escalation in the US-China trade conflict, leading to a fall in the domestic unit.

Meanwhile, the 30-share BSE Sensex is modestly lower by 29.83 points or 0.08 per cent at 38,128.09 at 1100 hrs.

The ballooning of crude prices has significantly increased the country's oil import bill and it can also lead to a worsening of the current account deficit and fiscal deficit for the domestic economy.

The government, however, said the currency will stabilise on its own as there were no domestic factors contributing to this depreciation.

"Rupee has depreciated primarily on trade war fears and rise in global crude oil prices. The government does not have control over these...so there is only so much we can do," a top finance ministry official told PTI.

Globally, the US dollar surged against developed and emerging-market currencies over an escalating trade conflict between the US, China and Canada.

Emerging market currencies such as the Argentine peso, Turkish lira, South African rand, Brazilian real, Indonesian rupiah and Indian rupee sank as investors fear these export-oriented economies will be caught in the escalating trade war.

Investors were also nervous after the US President Donald Trump said he wanted to impose new tariffs on more Chinese goods by this weekend.

The bond yield curve also shot- up substantially to hit a fresh four-year high of 8.06 per cent.

The Indian rupee has been among the worst performing currencies in the region, attributed to its current account deficit and mayhem in emerging markets caused by the Turkish lira and Argentina crisis amid contagion fears.

Hardening global yields have spurred global funds to pull out from stocks and bonds markets this year and adopted a cautious stance towards India.

Foreign investors and funds have pulled out $280 million from the Indian equity markets so far this year.

Meanwhile, Indian exporters are facing uncertainty due to a continuous depreciation of the rupee as they are not able to negotiate properly prices of goods in the global markets and also unable to hedge due to currencies sharp volatility.

A weaker rupee has resulted in rise in import bills, costlier foreign education and travel. The biggest impact is on petrol and diesel prices which have witnessed steady increase throughout the year.

The rupee hasn't crashed as much as Turkish Lira or Argentine Peso did versus the greenback. These currencies depreciated over 70 per cent so far this year, while rupee shed 10 per cent, and is comparable to the currencies of Indonesia, South Africa and Brazil.

With PTI Inputs

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