The Indian rupee on Thursday plunged to a fresh record low of 70.28 a dollar after the country’s trade deficit widened to a five-year high as petroleum imports surged. At 9.15 am, the rupee was trading at 70.27 a dollar, down 0.53%, from its Tuesday’s close of 69.89. The home currency opened at 70.25 and touched an all time low of 70.28 a dollar. On Wednesday, markets were closed due to Independence Day.
The 10-year bond yield stood at 7.847%, from its previous close of 7.818%. Bond yields and prices move in opposite directions.
“In recent months, global activity indicators such as global PMI and world trade volumes have moderated. This along with an overvalued rupee could weigh on India’s exports and thus growth recovery. As a result, we think the trade balance will likely remain elevated, albeit lower than the July print. Widening trade deficit amid heightened global uncertainty is likely to keep the INR (rupee) under pressure,” said Edelweiss Securities in a 14 August report to its investors.
Trade deficit widened to $18.02 billion in July government data showed on Tuesday. That compared with the $15.7 billion median estimate in a Bloomberg survey of 24 economists and $16.6 billion in June. The last time the trade deficit was wider was in May 2013 at $19.1 billion, according to data compiled by Bloomberg.
Merchandise exports last month rose to $25.77 billion from a year ago, while imports rose 28.81% to $43.79 billion. Oil imports surged 57.41 per cent to $12.35 billion.
In early trade, the Sensex was down nearly 150 points while Nifty50 index was below 11,400.
Traders will keep an eye on the release of minutes of Reserve Bank of India’s policy meeting held on 1 August due later today after 5.30 pm.
So far this year, the rupee has weakened 9.15%, while foreign investors have sold $140.10 million and $5.34 billion in equity and debt markets, respectively.
Most Asian currencies rose as news of a surprise resumption in US-China trade talks aided sentiment, while Turkey was thrown a financial lifeline by Qatar.
China Offshore was up 0.36%, China renminbi 0.29%, Singapore dollar 0.25%, Philippines peso 0.2%, South Korean won 0.16%, Thai Baht 0.15%, Malaysian ringgit 0.05%. However, Indonesian rupiah was down 0.28%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.294, down 0.1% from its previous close of 96.391.
