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Rupee in free fall, sinks 56 paise to new 16-mth low of 68.07 a dollar

Press Trust of India  |  Mumbai 

The went into a tailspin by plunging 56 paise today, the second biggest single-day fall of 2018, to end at a new 16-month low of 68.07 as panic demand rattled market.

It has been in a virtual free fall for the Indian unit which settled a hairs breadth below its intra-day low of 68.15 a

This is the lowest closing for the since January 24, 2017 when it had ended at 68.15 against the US

A slew of domestic and external factors has made the fundamentals unfavourable for the - including a massive trade balance deficit and a declining level of foreign direct investment (FDI).

Overall forex market has been hampered on the heels of the boiling global crude prices - its highest advances since 2014 is squeezing the carry-trade returns on the rupee to a point where they are the worst in

Crude prices hit a 3-year high supported by tight supply and planned US sanctions against that are likely to restrict from one of the biggest producers in the Middle East

The Brent crude, an international benchmark, was trading at USD 78.96 a barrel in early Asian trade.

being a net crude oil importer, a rise in prices can affect the import bill and disrupt the fiscal position, derailing growth potential.

Hardening prospect of a series Fed rate hike this year along with exodus of capital outflows were the other major trigger points exerting pressure on the rupee, a commented.

The trouble is that a free-fall in the would lead to a wave of corporate bankruptcies and rating impact on these companies as they have kept most of their foreign exposures unhedged largely bettting on rupee stability, a warned.

Moreover, the global sentiment is already cautious because of US Donald Trump's protectionist stance and threat of a trade war.

However, domestic equities witnessed a largely muted reaction after the poll outcome suggesting that the BJP might not be able to reach the half-way mark on its own to claim government formation in

The market had rallied in early trade on investors' hope that the BJP would get the absolute majority to form a government and opening a path for more reforms.

Though, the result provides some reassurance to the BJP that its popularity remains intact, a commented.

The rupee opened lower at 67.68 from overnight level of 67.51 at the Foreign Exchange (Forex) market.

It remained under immense pressure most part of the day reacting to poll outcome as BJP forming a government in the state comes as a positive sign for the beleaguered

The Indian unit finally broke down of key 68-mark and plunged sharply to fresh session low of 68.15 in the last hour before ending at 68.07, revealing a sharp loss of 56 paise, or 0.83 per cent.

The RBI, meanwhile, fixed the reference rate for the dollar at 67.5288 and for the euro at 80.5281.

Meanwhile, the bond market also witnessed carnage with the yield on the benchmark 10-year government bond maturing in 2028 surging to 7.90 per cent from 7.83 per cent last week.

Globally, the dollar inched broadly higher, as traders once again focused on likely interest-rate differentials across the developed-market currency matrix. The Federal Reserve remains pre-eminently the central likely to tighten policy the most in the near-to-medium term.

The dollar index, which measures the greenback's value against a basket of six major currencies was down at 92.78.

In the cross currency trade, the rupee remained weak against the pound sterling and finished at 91.98 per pound from 91.75 and drifted further against the euro to end at 80.90 as compared to 80.88 earlier.

It also lost further ground against the Japanese yen to settle at 61.93 per 100 yens from 61.64 yesterday.

In forward market today, premium for dollar softened due to sustained receiving from exporters.

The benchmark six-month forward premium payable in September edged down to 96.50-98.50 paise from 98.50-100 paise and the far-forward February 2019 contract eased to 232.25-234.25 paise from 233-235 paise previously.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, May 15 2018. 19:30 IST
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