Mumbai, Sep 11 (IANS) Inflationary risks along with broadly negative global cues depressed the Indian rupee to a new low of 72.74 to the US dollar on Tuesday.
According to analysts, expectations of higher overall inflation rate, growing protectionism in global trade and an increasing outflow of foreign funds from the country’s equity market have subdued the Indian currency.
On a closing basis, the Indian rupee weakened by 24 paise to touch a fresh closing low of 72.69 per US dollar than its previous close of 72.45 per greenback.
The Indian rupee touched a fresh low of 72.74 at the Inter-Bank Foreign Exchange Market. Its previous record low was 72.67 made on Monday.
“Rising oil prices and comments from China about approaching WTO (World Trade Organization) to slap trade sanctions on US triggered a rout in rupee,” Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.
“Rupee remains fragile as emerging markets’ sentiments are sour. Over this week we expect a range of 72.30-73.50 on spot.”
Rushabh Maru, Research Analyst at Anand Rathi Shares and Stock Brokers, said: “Since the RBI (Reserve Bank of India) is not intervening aggressively, there is lot of speculative buying in the market.”
The apex bank is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.
According to Madhavi Arora, Economist, FX and Rates at Edelweiss Securities: “… the policy stress instead should be on adhering to the fiscal and inflation targets, letting banking asset resolution work itself through, and let underlying trade competitiveness improve gradually as the trade-weighted exchange rate acts as a natural stabilizer.”
Besides, focus will now shift to the country’s IIP (Index of Industrial Production) and CPI (Consumer Price Index) data.
India’s macro-economic inflation and industrial data points such as the CPI, wholesale price index (WPI) for August and IIP for July are scheduled to be released on Wednesday.
Apart from macro-data, any further outflow of foreign funds from the Indian equity and bond markets might have an adverse impact on the rupee.
In terms of investments, provisional data with exchanges showed that foreign institutional investors (FIIs) sold scrips worth Rs 1,454.36 crore.
–IANS
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