Rupee slides to 2-month low on 2nd COVID-19 wave in Europe

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Mumbai, Oct 29 (PTI) The rupee declined further by 23 paise to close at a two-month low of 74.10 against the US currency on Thursday, tracking weak domestic equities and strong dollar amid global risk aversion.

At the interbank forex market, the domestic unit opened weak at 74.02 against the greenback, then lost further ground to touch an intra-day low of 74.16 to the dollar.

Investors flocked to safe-haven assets and cut riskier bets after the imposition of fresh lockdown measures in Europe to control resurging coronavirus cases, analysts said The rupee lost 23 paise to close at 74.10 against the dollar - breaching the 74 level for the first time since August 26. On Wednesday, the rupee had depreciated by 16 paise to settle at 73.87.

The rupee closed the holiday-shortened week with a total loss of 49 paise or 0.66 per cent, marking the fourth straight week of losses.

'The slide for the rupee continues, as it slips below the 74/USD level, INR is now trading at a two-month low. The US dollar has strengthened as investors flock to a safe haven in times of uncertainty. The rising number of COVID-19 cases has forced governments in a few EU countries to enforce lockdown,' said Nish Bhatt, Founder and CEO, Millwood Kane International - an Investment consulting firm.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.09 per cent to 93.49. Brent crude futures, the global oil benchmark, fell 0.87 per cent to USD 38.78 per barrel.

On the equity market front, BSE index Sensex ended 172.61 points or 0.43 per cent lower at 39,749.85 in choppy trade. The broader NSE Nifty fell 58.80 points or 0.50 per cent to 11,670.80.

Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 1,130.98 crore on a net basis on Wednesday, according to exchange data.

'Jitters on the street ahead of the US elections and dimming hopes of a stimulus plan from the US administration in near term have led to the recent rise in Dollar Index from a multi-week low,' said Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking.

Besides, uncertainty due to the second wave of COVID-19 cases hitting the US and Europe has also dented investor sentiments, leading to sell off in global as well as domestic equities, Sachdeva said adding that 'amid a shaky landscape, the rupee still looks to find some breather around 74.50 mark. However if that is also taken out, 75 mark also looks likely on the cards'. Going ahead, investors would track ECB policy meeting as well the US Q3 GDP data for further cues.

'Rupee depreciated as fresh lockdowns in Europe spooked investor appetite for risk assets. In this holiday shortened week, the rupee closed at the weakest level in two months,' said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities.

Vakil further noted that the expectation of fiscal stimulus package to support the economy before Diwali also weighed on rupee. Traders are now awaiting outcome of central bank meetings, with the European Central Bank expected to hold off on new measures later in the day and hinting at action in December.

According to Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services, 'the continuation of pandemic in absence of a vaccine is creating a havoc and is playing out in forex market. The fear that economic conditions are going to get worse before they get better, is keeping the dollar strong against emerging market currencies'. PTI DRR MR