Rupee falls lowest in nearly six months against US dollar, slides past 75 vs USD

08 Oct , 2021 By : Kanchan Joshi

The Indian currency today came under pressure despite domestic equity markets surging close to record highs. The Indian rupee hit its lowest in five-and-a-half months today, after the Reserve Bank of India left key rates unchanged and reiterated the need to unwind pandemic-era stimulus only gradually to aid a nascent economic recovery.

The rupee opened on a weak note and fell below the 75 per US dollar level in early trade on Friday as rising crude prices and strength of the American currency in the overseas market weighed on investor sentiments.

At the interbank foreign exchange, the rupee fell to 75.16 at day's low as compared to Thursday's closing of 74.79 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.02 per cent to 94.23.

Other emerging market stocks in Asia benefited from a rise in global risk appetite as US lawmakers approved a legislation to temporarily raise the debt limit and avert a default.

The Reserve Bank of India (RBI) kept interest rates steady at a record low, as expected, and said accommodative monetary policy was needed due to an uneven economic recovery from pandemic-related shutdowns. The RBI's dovishness dashed expectations of investors hoping it would hint at moving towards policy normalisation like some global central banks, with the rupee shedding 0.4% to hit its lowest since late-April.

“The monetary policy seems more dovish that general expectations but in-line with our forecasts. Weak growth should keep RBI go more easy on normalization, even if some EMs have already hiked (based on their economic position)," said Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services Ltd.

The currency is also under pressure due to spiking crude prices, having declined nearly 2% over the past two weeks.

Foreign institutional investors were net sellers in the capital market on Thursday as they offloaded shares worth Rs1,764.25 crore, as per exchange data.

On the domestic equity market front, the 30-share Sensex was trading nearly 500 points higher was the broader Nifty was firm above 17,900. Global oil benchmark Brent crude futures rose 1.10 per cent to USD 82.85 per barrel.