Chinese economic worries plunge rupee to new 2 year low| MENAFN.COM

Wednesday, 10 August 2022 03:12 GMT

Chinese economic worries plunge rupee to new 2 year low

(MENAFN- Khaleej Times)Negative cues emanating from China coupled with bearish equity markets at home resulted in the rupee falling to its lowest levels against the US dollar in over two years during the intra-day trade on Monday.

The Indian currency closed at 66.82 to a dollar down 36 paise from its previous close of 66.46 on Friday (September 4 2015). The rupee had touched an intra-day high of 66.86.

The rupee had last breached the 66.80-level to a greenback on September 4 2013.

The Indian currency came in for a beating as frantic dollar-buying in China devalued the off-shore yuan and other Asian currencies including the rupee.

The volatility started after reports from China suggested that the central bank there was planning to impose stringent regulations on foreign exchange purchases from October to curb speculation and volatility.

Interestingly the Chinese yuan was two percent weaker in off-shore markets than domestically.

"The rupee is being impacted from the pressure put on yuan (devaluation) and the expected shortfall of dollars in China due to the reports on new regulations" Anindya Banerjee associate vice president for currency derivatives with Kotak Securities explained to IANS.

"The macro data on foreign reserves from China suggest there has been a huge outflow of funds despite direct investments and exports."

According to Hiren Sharma senior vice president currency advisory at Anand Rathi Financial Services the next level to watch out for is 66.90.

"The next level will most probably be around 66.90-67.10 as today itself 88.86 was breached and the rupee closed at 66.82. The Labour Day holiday in the US also did not provide any respite to the free falling rupee" Sharma told IANS.

The rupee's downward spiral also impacted the barometer of the Indian equity markets -- the 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) which plunged by over 308 points or 1.22 percent on Monday.

Investor confidence was eroded on the back of fears of an interest rate hike in the US weak monsoon and bearish Asian markets.

The US Fed is expected to announce its decision to hike interest rates after a decade or so of easy monetary regime with interest rates pegged at near zero levels during its policy meet scheduled on September 16-17.

High interest rates in the US are expected to lead away the foreign portfolio investors (FPIs) from emerging markets like India. It is also expected to dent business margins as access to capital from the US will become expensive.

The data with the National Securities Depository Limited (NSDL) showed that the FPIs off-loaded stocks worth Rs.1233.88 crore or $185.82 million on Monday.

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