Rupee hits fresh 2-week low of 68.88 a dollar, plunges 28 paise

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Mumbai: The rupee today skidded to its lowest in two weeks, falling by a staggering 28 paise to end at 68.88 against the US dollar on frantic demand for the US currency from importers and corporates.
Widespread concerns about steadily growing country’s trade deficit as well as short-term debt liabilities and protectionist tendencies on the global front largely weighed on forex front despite its recent pull back from life lows.
Ongoing trade-war rhetoric between the US and China too added some nervousness on the trading front coupled with extreme bullish dollar sentiment overseas.
In contrast, Indian stocks closed at new record highs as investors showed optimism over highly bullish first-quarter corporate earnings season even as other major equities in Asia ended mixed.
Heavy dollar purchases led by foreign banks, likely for their custodian clients, largely outweighed early gains tracking a strong yuan following the Chinese central banks weekend move to cushion depreciation in its currency.
Meanwhile, country’s forex reserves declined by USD 950.9 million to USD 404.192 billion in the week to July 27, owing to a fall in the foreign currency assets, RBI data showed.
Foreign investors poured in over Rs 2,300 crore in the local equities in July, after pulling out funds for three months in a row, largely due to expectations of a lower trade deficit following a correction in crude oil prices.
The latest inflow comes after such investors had taken out more than Rs 61,000 crore from the capital markets (equity and debt) during April-June.
On the energy front, oil prices bounced back after Saudi crude production registered an unexpected decline in July despite a pledge to raise output from July and US drilling appeared to slow.
The Benchmark brent for September settlement is trading higher at USD 73.92 a barrel in early Asian session.
The rupee started the week with a mildly positive tone at 68.57 from last weekend close of 68.60 at the Interbank Foreign Exchange (forex) market.
It gained traction to hit a high of 68.54 in early deals before taking a sharp reversal as demand for dollars from importers and banks outweighed inward remittances and conversion of the US currency by exporters.
After plunging to a session low of 68.89 in late afternoon, the local currency finally ended at 68.88, showing a sharp loss of 28 paise, or 0.41 per cent.
The Financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 68.6833 and for the euro at 79.3805.
The bond markets, however, showed a mixed trend and the 10-year benchmark bond yield settled at 7.77 per cent.
Globally, the US dollar edged higher towards a near one-year high against a basket of the other major currencies on Monday after the latest US jobs report underlined expectations for the Federal Reserve to stick to a gradual pace of rate hikes this year.
Against a basket of other currencies, the dollar index is sharply up at 95.29.
In the cross currency trade, the rupee however gained further ground against the pound sterling to finish at 89.03 per pound from 89.42 and also strengthened against the euro to close at 79.43 as compared to 79.60.
But the local unit, fell back against the Japanese yen to end at 61.78 per 100 yens from 61.50 last Friday.
Elsewhere, the British pound remained under pressure against the US dollar after talk over the weekend on a likely no-deal Brexit from the UK international trade secretary hit investors’ sentiment.
The euro is trading slightly lower against the highly positive greenback even as euro zone reported marginally higher inflation but weaker growth than expected.
In forward market today, premium for dollar declined due to mild receiving from exporters.
The benchmark six-month forward premium payable in December eased to 119-121 paise from 120-122 paise and the far-forward June 2019 contract moved down to 266-268 paise from 268-270 paise earlier.