Rupee falls to all-time low of 84.09 against dollar; FPIs pull out $1.2 bn | Business News
The rupee slumped 37 paise to settle at an all-time low of 84.09 against the US dollar on Monday following a sell-off in global markets amid rising geopolitical tensions in the Middle East, worries over recession in the US and carryover trade in Japanese yen.
The decline in the currency came on the back of a sharp downturn in the equity markets and foreign capital outflows. Foreign portfolio investors (FPIs) pulled out Rs 10,073 crore ($ 1.20 billion) from the markets on Monday, putting pressure on the rupee, exchange data showed.
The currency opened at 83.78 and settled at its fresh record low level of 84.09 against the American currency.
According to Jateen Trivedi, Research Analyst, LKP Securities, the decline comes amid fresh economic concerns, including the appreciation of the Japanese yen due to rising interest rates in Japan for the first time since August 2006. “This rate hike has triggered a sell-off in risky assets, causing panic among borrowers,” he said.
The Japanese yen surged to seven-month highs against the dollar on Monday as traders aggressively unwound carry trades after a slew of economic data last week raised the prospect of a US economic downturn and bigger rate cuts from the Federal Reserve.
Weak US jobs data, along with disappointing earnings reports from large technology firms and heightened concerns over the Chinese economy, have sparked a global sell-off in stocks, oil and high-yielding currencies in the past week as investors sought the safety of cash.
Japanese index suffered its worst day in 37 years. Tokyo’s Topix fell 12.2 per cent, the sharpest sell-off since “Black Monday” in October 1987 and more than erasing its gains for the year. South Korea’s Kospi benchmark fell 8.8 per cent while the Australian S&P/ASX dropped 2.5 per cent. In Europe, the benchmark Stoxx Europe 600 shed 2.2 per cent. The UK’s FTSE 100 fell 2 per cent.
The rupee’s weakness persisted despite a sharp drop in the dollar index from $104 to $102.20, and a significant decline in crude prices from $78 to $72 in WTI. FPIs had offloaded shares worth Rs 3,310.00 crore on Friday, according to exchange data.
Ajit Banerjee, Chief Investment Officer of Shriram Life Insurance Company, said fears of the US staring at a recession intensified after the July jobs report, which threw a big downside surprise with fairly broad-based signs of weakening. US unemployment rate jumped to 4.3 per cent, its highest level in nearly three years and marking the fourth consecutive monthly increase. Besides, poor manufacturing PMI numbers and very poor new order numbers added further to the fear about weakening in the US economy.
