Rupee closes 19 paise weaker against US dollar at 66.76, after hitting 26-month low

Mumbai: The Indian rupee recovered marginally from 26-month low hit earlier in the session, but ended weaker on Friday as caution ahead of key economic data and a strong dollar overseas kept most traders on the sidelines.

The home currency closed at 66.76, down 0.29% from its previous close of 66.57. It had opened at 66.71 and touched an over two-year low of 66.89 per dollar intra-day— a last level seen on 4 September 2013.

The government will release gross domestic product (GDP) data for the September quarter next week. A Bloomberg analyst poll estimates the GDP growth to be 7.3%. With foreign portfolio investors pulling out of local shares and bonds, concerns that the US Federal Reserve’s imminent rate hike could result in further dollar outflows from emerging markets including India kept the rupee under pressure for the entire trading session.

Traders expect that the positive data on US personal income, durable goods orders and weekly jobless claims released on Wednesday will likely boost the Federal Reserve’s resolve to hike interest rates next month.

“The rupee’s fall has been largely a fallout of the global dollar strength and the outflows seen from our markets,” said Ashutosh Raina, head of forex trading at HDFC Bank Ltd. The dollar index, which measures the US currency’s strength against major currencies, was trading at 100.030, up 0.23% from its previous close of 99.795.

Most Asian currencies had also weakened against the dollar on Friday. Malaysian ringgit was down 0.75%, South Korean won 0.49%, Indonesian rupiah 0.43%, Taiwan dollar 0.35%, Thai baht 0.34%, China offshore 0.33%, Singapore dollar 0.22%, China renminbi 0.08%, Philippines peso 0.05%.

Foreign portfolio investors have pulled out more than $1 billion from the domestic equity and bond market over the last one month. In 2015-16 so far, FIIs have sold $2.36 billion in equity, the steepest selling since fiscal year 2009. In 2015-16, FIIs were the net sellers in equity in five out of eight months.

The benchmark Sensex rose 0.65%, or 169.57 points, to close at 26,128.20.

The yield on India’s 10-year benchmark bond closed at 7.767%, a lowest level since 11 September, compared with its Thursday’s close of 7.724%. It opened at 7.724% and touched a high of 7.771%—a last level seen on 11 September. Bond yields and prices move in opposite directions.

Intra-day, public sector banks were seen selling dollars around 66.85/$, spurring talks that these could be at the behest of the Reserve Bank of India. However, this could not be confirmed from banks that typically buy on behalf of the central bank. Dealers said that dollars were sold also on the view that the government would be able to push through its goods and services tax (GST) in the current session of Parliament.

“There has been some dollar selling at the peak as some people expect positive developments in the winter session of the Parliament such as passing of key bills,” said K. Harihar, head of treasury at First Rand Bank.