The home currency is at its lowest level since December 14, down 0.28% at 64.25.
MUMBAI – The Indian rupee on Tuesday closed near a two-month low against the US dollar, following a sell-off in global and local equity markets.
The home currency ended at 64.25 — a level last seen on 14 December, down 0.28% from its previous close of 64.07. The local currency opened and touched a low of 64.40 a dollar.
India’s benchmark BSE Sensex index fell 1.61% or 561.22 points to 34,195.94. So far this year, BSE Sensex has risen 0.41%.
Overnight, the Dow Jones Industrial Average fell over 1,100 points, its biggest slump in six-and-half years after US wage data on Friday pointed to quickening inflation, which may lead to higher rates by the US Federal Reserve.
Indian markets are already under pressure after the Union budget focused on populist measures ahead of general elections in 2019 and imposed a long-term capital gains tax on equities.
Traders are also keeping an eye on the Reserve Bank of India’s (RBI) interest rate decision on 7 February. Analysts says the RBI will keep interest rates on hold on expectations that inflation may accelerate further due to higher crude oil prices and a proposed hike in minimum support prices (MSP) for farmers.
Of the 15 economists surveyed by Mint, 14 expect the central bank to keep the repo rate—the rate at which the central bank infuses liquidity in the banking system—unchanged at 6%. Only one expects a rate hike of 25 basis points.
Analysts said the government breaching its fiscal deficit target for fiscal year 2017 and an upward revision in its deficit target for the next fiscal could prompt RBI to change its policy stance in the near future.
The benchmark Bond yield fell after economic affairs secretary Subhash Chandra Garg said that the government may skip it last auction of Rs 11000 crore if yields remained higher. It has cash to manage expenses without the last auction, Garg added.
India’s 10-year bond yield was at 7.568% from its Monday’s close of 7.605%. Bond yields and prices move in opposite directions.
Since the beginning of this year, the rupee has fallen 0.6%, while foreign institutional investors have bought $2.42 billion in local equity markets and $1.79 billion in debt markets.
