Economy

Rupee falls in early trade amid weaker domestic market

The rupee has fallen over 15% since the beginning of this year on higher current account deficit, soaring crude oil prices and continous foreign investors outflow form the Indian market.

The Indian rupee opened lower in early trade amid strong dollar demand for the US dollar on Friday. The currency which closed at 73.27 yesterday slipped 15 paise to open at 73.42 against the US currency. The rupee weakened amid lower domestic equity markets hit by the ripples of IL&FS fiasco and global sell off in equity markets.

Sentiments were also hit after the Chinese yuan fell affecting other Asian currencies.

The rupee has fallen over 15% since the beginning of this year on higher current account deficit, soaring crude oil prices and continous foreign investors outflow form the Indian market.

Brent crude prices were trading  at $76.42 per barrel in trade today, down over 4% in three days.

The oil price hit $86.72 per barrel in early October putting pressure on the Indian currency. Since payment of crude oil prices is done in dollars, a higher crude rate leads to more amount of rupee being converted to dollar, thereby strengthening the US currency.

CAD in the first quarter of this fiscal widened to $15.8 billion, which is around 2.4 per cent of the country’s Gross Domestic Product (GDP), as compared with $15 billion in the corresponding quarter a year before.

In the January-March quarter, the trade shortfall stood at 1.9 per cent of the GDP.

A rise in the current account deficit leads to depreciation in the value of rupee since more quantity of local currency needs to be utilised for payment of higher imports.

Foreign institutional investors (FIIs) have withdrawn Rs 97,003 crore in investments from the Indian capital market this calender year. Analysts have attributed the increase in FII outflows to high valuations of the Indian stock market and rising yields in the US bond market.

Outflow of funds from the Indian market leads to a fall in the value of rupee since there is more demand for dollars from foreign investors after exiting the Indian market.

Meanwhile, the benchmark BSE Sensex plunged 123 points, or 0.37 per cent, to 33,566 in opening trade.

Via
businesstoday
Source
www.businesstoday.in

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