Indian Rupee, along with other Asian currencies, came under pressure in today’s trade due to strong dollar demand from banks amid escalating trade tensions between US and China. The domestic currency opened at 72.03 and later fell to 72.08 against the US dollar, showing a decline of 42 paise over its previous closing.
At the Interbank Foreign Exchange, later the local unit fell to its lowest in 2019 at 72.25 per dollar against previous close of 71.66 against the dollar last Friday.
The domestic unit’s all-time low value of Rs 74.07 was recorded on 5 October 2018.
On Monday, China’s currency yuan fell to 7.1487 to the US dollar, its weakest point since early 2008, in Asian trade amid concerns of a global recession after a sharp re-escalation in the US-China trade war shook investors’ confidence and darkened the global economic outlook.
Trade wars between China and the US took a dramatic turn for the worse with US President Trump announcing an additional duty on some $550 billion of targeted Chinese goods, hours after China unveiled retaliatory tariffs on $75 billion worth of US goods.
Except for the safe-haven Japanese Yen, rest of global and Asian market currencies were trading weak against the dollar. The dollar index, which gauges the greenback’s strength against a basket of six currencies, inched up 0.06 per cent to 97.70.
However, a higher opening in domestic equities, easing crude oil prices and the government’s announcement of several measures to boost economy supported the domestic currency and restricted the fall.
Benchmark indices started on a positive note after the FM on Friday announced a series of measures to build the confidence of the capital markets and auto industry in particular and improvement of liquidity for industry and MSMEs in general.
A raft of measures taken included exemption of startups from ‘angel tax’ and upfront infusion of Rs 70,000 crore into public sector banks, in efforts to boost economic growth from a five-year low.
This also included a rollback of enhanced super-rich tax on foreign and domestic equity investors. The Budget proposal to hike surcharge on FPIs had spooked foreign investors, who withdrew more than Rs 24,500 crore from domestic equities in July and August.
On Friday, foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,737.20 crore. Gold prices rose to more-than-six-year high and benchmark Treasury yields hit their lowest since July 2016 as investors fled to safer assets.
Oil prices fell on Monday, pushing US crude to the lowest in more than two weeks after China announced that US crude oil would be subject to new tariffs. Brent crude futures, the global oil benchmark, was down 0.91 per cent to USD 58.80 per barrel, amid escalated trade war tensions.