Rupee tanks 97 reach a minimum of 9 months in weak macro data, strong dollar

MUMBAI: The rupee On Tuesday it fell sharply by 97 percent, to a minimum of more than nine months of 72.39 against the US dollar, due to the strong liquidation in the national stock market, the weak macroeconomic environment and a stronger dollar that kept nervous at the investors.

The Indian currency was pressured after official data published on Friday showed that India's GDP growth fell to a minimum of more than six years from 5 percent in the June quarter.

In addition, the growth of eight central industries fell to 2.1 percent in July, mainly due to the contraction in the production of coal, crude oil and natural gas.

The rupee opened lower at 72 to the US dollar at the interbank foreign exchange market and lost further ground to touch a low of 72.40 against the dollar.

The national currency was set at 97 paise at 72.39 per dollar, registering its worst fall in a single day since August 5 and the lowest closing level since November 13, 2018.

The market closed on Monday because of Ganesh Chaturthi.

In addition, the IHS Markit India Manufacturing Purchasing Managers' Index (PMI) showed that the country's manufacturing sector activity decreased to its minimum of 15 months in August.

GDP data were lower than expected and fell for the fifth consecutive quarter. June quarter GDP grew at the slowest pace since March 2013. Monthly car sales, eight core infrastructure data and PMI data also weakened along with GDP and weighed on the Indian rupee said V K Sharma, director of PCG and capital markets strategy, HDFC Securities.

Forex traders said a stronger dollar also dragged the rupee down. The dollar index, which gauges the greenback's strength against a basket of six currencies, inched up 0.36 per cent to 99.27.

The dollar index rose to the highest in more than two years, as uncertainty about the planning of trade negotiations between the United States and China underpinned the demand for the US currency, Sharma said.

The prolonged trade war between the United States and China and fears about Brexit dragged the national currency, even when crude oil prices declined.

Angel Broking research analyst Vaqarjaved Khan said: The restlessness of the US-China trade war and the weak quarterly data on India's GDP lead to this decline.

Es probable que la rupee se deprecie hacia 73.5 a fines de septiembre de 1919 si la guerra comercial se intensifica aún más entre Estados Unidos y China y las salidas del mercado de valores de India continúan.

China said on Monday it had filed a complaint against the United States with the World Trade Organization (WTO), a day after Washington imposed new tariffs on billions of dollars in Chinese products.

"The rupee , already under pressure from strong dollar amidst Brexit worries, received a major jolt as June quarter's GDP reading fell to 5 per cent. This was further exacerbated by dismal August auto sales even as markets gave a thumbs down to PSB mergers, thereby raising worries of further rupee selling, as the FII exodus from equities continues," Anand James, chief market strategist at Geojit Financial Services, commented.

Entries are coming in the form of bonds, anticipating more rate cuts, but they are still less compared to exits, he added.

Foreign funds withdrew $ 2.3 billion from local shares in August, the largest outflow since October, Sharma said.

Brent crude futures, the global benchmark for oil, declined 1.55 percent to $ 57.75 per barrel.

The 10-year government bond yield was 6.52 percent on Friday.

In the domestic market, the BSE reference sensex crashed almost 770 points and the NSE Nifty fell more than 225 points on Tuesday. The 30-share index ended 769.88 points, or 2.06 percent, lower than 36,562.91. The broader Nifty also sank 225.35 points, or 2.04 percent, to settle at 10,797.90.

Meanwhile, Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee /dollar at 71.7586 and for rupee /euro at 79.2397. The reference rate for rupee /British pound was fixed at 87.4292 and for rupee /100 Japanese yen at 67.49.