Rupee falls 10 paise to 64.93 due to capital outflows amid rate hike

The rupee on Thursday dropped by 10 paise to close at 64.93 against the US currency due to sustained foreign fund outflows amid growing prospects of rate hike by the US Federal Reserve next week.

The domestic currency had opened on a weak note at 64.92 fell to a low of 94.98 per dollar in early session as trade war worries gripped investors.

The White House indicated that President Donald Trump might take additional action against Chinese products to checkl the trade deficit.

The US also challenged India's export subsidy schemes at the WTO, saying these programmes harm American workers and manufacturers by creating an "uneven" playing field.

The dollar fell against the Japanese yen as investors flung to safe haven assets amid growing trade worries helping the rupee recover its losses and touch a high of 64.80 in day trade.

However, the local unit could not hold onto the gains amid losses in stock markets and fell in the fag-end of the session to close at 64.93, showing a loss of 10 paise or around 0.15 per cent over the last close.

The US Federal Reserve is widely expected to tighten the rates next week despite a disappointing February retail sales data and a soft inflation reading, a currency dealer said.

"Rupee remained firm and 65 was defended as a third consecutive contraction in US retail sales rendered the greenback weak early in the day. Russia-UK tensions may revive strength in US dollar, but rupee will keep its eye on trade data as prospects of trade war still remains potent," Anand James, Chief Market Strategist at Geojit Financial Services said.

Meanwhile, foreign investors remained net sellers in the equity markets for the second day as they withdrew a net Rs 7.05 billion from stocks.

The BSE Sensex fell by 150 points to close at 33,685.54 in a volatile trade while Nifty ended down 50.75 points, or 0.49 per cent, at 10,360.15 due to losses in banking stocks.

The RBI fixed the reference rate for the US dollar at Rs 64.9366 and for euro at Rs 80.3201.

In cross currency trade, the rupee firmed up against the pound to close at 90.46/48 from 90.59/61 earlier. It fell against the euro to finish at 80.25/27 from 80.23/25 earlier and against the Japanese yen to 61.28/30 per 100 units from 60.91/93 per 100 units yesterday.

In the forward market, the benchmark six-month forward premium payable in August moved to 122.50-124.50 paise against 121-123 paise earlier. The fag-forward February 2019 contract were up at 242.50-244.50 paise against 239-241 paise previously.

Crude oil prices dropped with the benchmark Brent North Sea declining 3 cents to USD 64.86 per barrel. Oil - West Texas Intermediate however firmed up to $61 per barrel.