Rupee crashes 27 paise to hit all-time low of 86. 31 against US dollar in early trade
MUMBAI: The rupee has made one of its worst opening sessions on Monday, plumbing past the 86 level, losing as many as 27 paise to touch 86.31, after a blowout US jobs report has left the market believing that the likelihood of the Federal Reserve leaving the rates high for longer than expected.
The rupee opened at 86.12 but quickly fell to the historic low of 86.31 in early trading, registering a 27-paise loss from its previous close of 86.04 last Friday. This slide was primarily driven by a strong US dollar, along with volatile global market conditions.
Forex traders told the TNIE that a surge in crude prices (sniffing the USD 81/barrel mark), persistent foreign capital outflows, and a negative trend in the domestic equity markets also added pressure on the rupee.
The benchmarks had a bloody day to begin with Monday losing almost 1.25 per cent in the opening one hour of trade which marginally recovered later on still down about 75 bps from the Friday close.
US employers added 2,56,000 jobs last month, compared to the 1,60,000 jobs expected, while the unemployment rate unexpectedly dipped to 4.1 per cent in the world’s largest economy.
US interest rate futures show that market is expecting the Fed to cut rates only once this year, as against the two the Fed chair had said after the December review. The dollar index rose to a more than two-year high on Friday, to nearly 110. The 10-year US yield climbed to a 14-month high.
For speculators who are already into bearish bets on the rupee, the US job numbers provide one more reason to hold onto them, a currency trader at a public sector bank has said.
"Having said that I think we are now near levels where a number of negatives for the rupee are in the price. Plus, we are long overdue a decent correction," the trader added.
Options pricing suggests rupee is likely to weaken further and some are expecting the unit to drop to 88 over the medium term and plumb even to 90-92 levels in the next 6-10 months.
According to forex traders, the dollar was bolstered by better-than-expected job growth in the US, which led to a rise in benchmark US treasury yields amid expectations that the Federal Reserve may slow its interest rate cuts.
Brent crude, the global oil benchmark, rose 1.44 per cent, reaching USD 80.91/barrel in futures trade, adding to the inflationary pressures on the rupee.
