Trade war fears, crude prices keep rupee down

The domestic currency opened on a positive note at 19 paise higher than its previous close of 70.80 per dollar, perhaps led by the strong GDP data, but began losing steam.

MUMBAI: The rupee closed at yet another record of 71.21 on Monday on the back of overseas fund outflows, trouble from Turkey and Argentina, rising trade war tensions and climbing crude prices. The rupee slide continued, despite the 8.2 per cent Q1 GDP indicating robust economic environment.  

The domestic currency opened on a positive note at 19 paise higher than its previous close of 70.80 per dollar, perhaps led by the strong GDP data, but began losing steam in line with the falling equity markets.
Forex market sentiment took a beating particularly due to contagion risks from Turkey and Argentina, which has been rattling emerging market economies for some time now.

On a net basis, FPIs sold shares worth Rs 212.81 crore, while domestic institutional investors were net buyers to the tune of Rs 171.92 crore on Friday, as per provisional data. And it appears that the sell-off season for FPIs is likely to stay here for a while.

Market watchers, who initially were troubled by the falling rupee, are now anticipating that its value will further erode to 72-73 against the dollar.So far this year, rupee depreciated over 10 per cent, largely weighed down by external factors like strengthening dollar with respect to emerging market currencies, which is why the government has maintained that the ongoing rupee correction was a doleful necessity.
Export-oriented sectors may pocket small gains, but for importers like oil marketing companies, it’s a double blow considering the hardening global fuel prices.

Meanwhile, though markets opened positively, Sensex and Nifty reversed course to end lower in the final hour of trade, in line with global sentiment. The broader NSE Nifty ended 0.8 per cent lower at 11,582.35, while Sensex closed down 0.9 per cent, at 38,312.52.

Sensex closed about 333 points down, recording its fourth straight session fall, while rupee hit fresh lows.
In early trade, Sensex gained over 289 points to touch a high of 38,934.3, on the back of Q1 GDP data, but lost momentum following data on manufacturing PMI, which slowed down in August. Subsequently, Sensex touched a low of 38,270.01 and eventually ended at a one-week low of 38,312.52.The gauge lost 251.56 points in the last three sessions.

On the other hand, the broader NSE Nifty closed below the 10,600-mark shedding 98.15 points, at 11,582.35.

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