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Rediff News  All News  » Business » Rupee dives to 3-mth low on strong dollar

Rupee dives to 3-mth low on strong dollar

February 28, 2018 21:21 IST

Most Asian currency and equity markets too suffered steep losses due to US rate hike fears.

The rupee fell by a steep 30 paise to end at a fresh three-month low of 65.17 against the US dollar, extending its losses for the third day after Federal Reserve's hawkish comments reignited interest rate hike fears.


The forex market sentiment turned highly fragile after the new Fed Chairman Jerome Powell gave a bullish assessment of the US economy during his first testimony before the Congress, fanning fear of a faster pace of interest rate hikes.

The Indian unit plunged to a low of 65.32 in intra-day levels before regaining some lost ground on suspected RBI intervention towards the tail-end trade.

The local unit finally settled at 65.17, showing a loss of 30 paise or 0.46 per cent -- its lowest closing since November 16.

Robust month-end dollar demand from oil companies along with aggressive hedging strategy adopted by importers in the wake of currency volatility and consistent unwinding by foreign investors also weighed on the rupee trade, a currency dealer said.

Most Asian currency and equity markets too suffered steep losses due to rate hike fears.

Besides imminent Fed rate hike fears, the rupee was pressured due to a fall in local markets after state-owned Punjab National Bank said that the amount of fraudulent transactions could go up further, a forex dealer commented.

Foreign investors sold shares worth Rs 1,750.5 crore on net basis today, provisional exchange data showed.

The RBI, meanwhile fixed the reference rate for the dollar at 65.1031 and for the euro at 79.5885.

India's manufacturing sector activity fell to a four-month low in February due to a slowdown in factory output and new business orders, a monthly survey showed.

Cost inflation rose to the highest since February 2017, bolstering the expectation of continued inflationary risks over the coming months.

Global crude prices struggled to stay in the positive territory.

Brent crude futures were trading at $66.49 a barrel in early Asian trading.

Globally, the US dollar hit five-week highs against a currency basket after Federal Reserve Chairman Jerome Powell said the US economic outlook remains bright, bolstering bets on further Fed rate hikes this year.

The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 90.44 in early trade.

However, in cross-currency trades, the rupee hardened against the pound sterling to end at 90.36 per pound from 90.60 and also strengthened against the euro to finish at 79.65 against last close of 79.92.

The home currency, however, fell back against the Japanese yen to close at 60.85 per 100 yens from 60.64.

In forward market on Wednesday, premium for dollar drifted further due to sustained receiving from exporters.

The benchmark six-month forward premium payable in July fell sharply to 102-104 paise from 112.50-114.50 paise and the far-forward January 2019 contract also dropped to 220-222 paise from 237.50-239.50 paise previously.

Photograph: Adnan Abidi/Reuters

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