Rupee Falls to Lowest Level in Over 2 Years Against Dollar

The rupee fell an over 2-year low of 67.09/dollar on Monday amid global risk aversion in emerging market assets ahead of the US Fed meet later this week. This is the lowest value of the rupee since September 4, 2013.

Concerns that Indian currency will not be immune if global volatility increases in the wake of the first US first Rate hike in a decade weighed on the rupee, traders said. Also weighing on the rupee, China’s yuan hit fresh 4-1/2 year lows today as plunging oil prices added to investors’ nervousness about riskier assets ahead of an US Fed meet. The People’s Bank of China on Monday continued guiding the currency lower, setting the yuan/dollar official midpoint at its weakest since July 2011.

China decision to loosen its grip on the yuan and allow slow but steady depreciation in recent weeks had added to concerns that the world’s second-biggest economy may be more fragile than expected.If China devalues its currency meaningfully, then there is a risk for rupee to depreciate to 68-70 against the dollar next year, Deutsche Bank added.

US interest rate hike, geopolitical uncertainty and risks of further yuan devaluation will likely keep global forex markets volatile, Deutsche Bank said in a note. Anticipation of a US rate hike for the first time in a decade has led to a selloff in global stock and commodity markets. The US Fed meets later this week.

In the Indian markets, foreign investors have sold equities worth over Rs 4,000 crore (net) so far this month, hurting the sentiment. This has weighed on the rupee. The recent strengthening of the dollar against a basket of six global currencies has weighed on the rupee.

The Sensex fell over 150 points while Nifty fell to close to 7,550 at day’s low before edging higher in early noon trade.

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Source:Ndtv

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