The rupee fell against the US dollar on Wednesday as strong US retail data increased the chances the Fed would raise its key rate this year. The rupee fell to 64.32 against the dollar, a level that was last seen on July 26. The dollar rebounded against a basket of major currencies in nearly three weeks. However, major domestic equity markets helped to support the rupee at lower levels. The Sensex rose more than 100 points to 31,603, led by IT buying and FMCG shares, although it shed some of its earnings later.
Here are five things to know about the decline of the rupee:
1) Retail sales in the United States increased more than seven months in July, as consumers spent more on 10 of the 13 retail sectors. In addition, upward revisions in sales in May and June were all akin to concerns that consumption had fallen on a downward trend and raised prospects for economic growth. Investors reacted by reducing the likelihood that the Fed will contract again this year and sent two-year Treasury yields to 1.36 percent from 1.29 percent on Friday.
2) Foreign investors, who have been a major contributor to the stock market meeting this year so far, have become net sellers of Indian stocks this month so far. They have sold shares worth almost Rs. 4,300 crores in August. Geopolitical concerns have affected global equity markets and have also affected inflows into emerging markets.
3) After climbing nearly 7 percent against the dollar this year, the rupee has witnessed some seals this month as investors rushed to buy safe assets like the dollar and gold over geopolitical tensions.
4) Meanwhile, a Reuters news agency report said the Reserve Bank of India (RBI) will likely have to drain up to $ 22 billion in excess liquidity from the financial system as strong foreign investment forces the bank Central to absorb the flows of dollars and sell Rupees to the profits of the cap in the rupee.
5) As of 9.45 am, the rupee fell 0.14 percent against the dollar to 64.25, compared with Monday’s close of 64.12 while the BSE Sensex was almost flat. (With agency tickets)