The Indian rupee weakened further to touch a fresh record low against the U.S. dollar in afternoon trade on Tuesday as concerns of a wider current account deficit resurfaced the country’s June trade deficit hit a record high. Data released late on Monday showed India’s June trade deficit widened to a record $25.63 billion, pushed by a rise in crude oil and coal imports, from $9.61 billion a year ago. Rupee was trading at around 79.13 against the greenback, after hitting a fresh lifetime low of 79.17. It had touched the previous record low of 79.12 last week and had rebounded a little when it closed at 78.95 on Monday.
Rupee to remain volatile this week, support in 79.55-79.80 range
The local unit has plunged 6 per cent against the US dollar this year, weighed down by broad strength in the greenback and as investors retreated from domestic share markets. “Hawkish stance of the global central banks has been pressuring emerging market currencies. However, improved performance of the service sector and upbeat collection of goods and service tax supported the rupee. The rupee also got support after the government of India increased import duty on gold by 5% on Friday to curb imports of gold and handle trade deficits. We expect the rupee to remain volatile this week and could find support in the range of 79.55-79.80,” said Rahul Kalantri, VP Commodities, Mehta Equities.
Hike in import duty on gold may support Rupee to some extent
“Indian rupee hit a fresh record low of 79.17 against the US Dollar today on the back of stronger Dollar and weaker than expected domestic data. FII outflows on Monday stood at Rs. 2,149 crores. The US Dollar Index has hit a fresh 20-year high of 106.09 on safe haven demand as risk assets slide. Rupee is expected to trade on a negative note on a firm tone in the US Dollar, elevated oil prices, and weak global market sentiments. Dollar may strengthen on expectations of aggressive rate hike by the Federal Reserve. Hike in import duty on gold may support Rupee to some extent as it may dent import demand for gold. Rupee may trade in the range of 78.50-80 in the next couple of sessions,” said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.
Indian equity markets erase majority intraday gains
Meanwhile, in domestic equity markets, the key benchmark indices had pared gains in the second half of the trading sessions owing to profit-taking in ITC and auto stocks. The BSE Sensex, which, touched a high of 53,866, was up 300 points at 53,500. The NSE Nifty had crossed the 16,000-mark for the first time in nearly a month in intraday trades on Tuesday. In the broader markets, the BSE MidCap and SmallCap indices also pared gains. The overall breadth, however, remained favourable.
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