LM:Rupee falls on renewed Fed tapering concerns, high trade deficit
Mumbai: The rupee weakened against the dollar as traders sold the Indian currency noting the strength of the greenback, especially against Asian emerging market currencies. A continued high trade deficit also increased pessimism over the local currency.
The dollar strengthened against Asian currencies after a stronger-than-expected US non-farm payrolls data.
Non-farm payrolls, the key to ending the US Federal Reserve’s $85 billion per month bond-buying programme, grew by 204,000 in October, much higher than the consensus estimates of a 80,000 rise.
The latest numbers have supported views that the Fed’s bond-buying programme will end sooner than later, which strengthened the dollar against emerging market currencies.
The dollar rose 0.69% against the Malaysian ringgit, 1.26% against the Indonesian rupiah and 0.55% against the Thailand baht.
The strength of the dollar also weakened the rupee. At 2:35pm, the Indian currency was trading at 63.3650 per dollar, down 1.4% from its previous close of 62.4750. The local currency opened at 63.005 a dollar and touched a high and a low of 62.9375 and 63.4250, respectively.
“The taper talk is back in the market and with a part of the oil demand also in the market now, the rupee is under pressure,” said a dealer with a private bank. “I will not be surprised if the rupee weakens to even 65 per dollar, especially if the Fed announces the tapering in the next couple of months,” he said, requesting anonymity.
A weak local stock market and high trade deficit numbers also pushed the rupee lower, said a dealer with a foreign bank, who also declined to be named.
India’s October trade deficit increased a whopping 56% to $10.5 billion as against $6.7 billion in September because of imports rose to $37.8 billion but exports fell to $27.3 billion.
Since January this year, the rupee has weakened 13.2% and has lost the second most after Indonesian rupiah among Asian currencies during that period.
India’s benchmark Sensex was trading at 20,571.03, down 0.46% from the previous close.
The overnight rise in US bond yields also led to the increase in the local bond yields. On Friday, the 10-year US treasury jumped 15 basis points to 2.74%.
The 10-year bond was trading at 9.013%, up 2 basis points from the previous close of 8.993% but off its days high of 9.13%.
The overnight call money rate was at 8.7%, up 44 basis points from the previous close of 4.3%. It opened at 8.75% and touched a high and a low of 8.85% and 8.65%, respectively.
