Rupee drops 28 paise against dollar as US-China trade tension escalates

The rupee on Wednesday fell further by 28 paise to 69.71 against the US currency, extending its losses for the third straight day due to escalating US-China trade tensions and a massive selloff in domestic equity markets.

Besides, sustained foreign fund outflow amid global trade fears also impacted the trading pattern in the currency market, forex dealers said.

However, a weak dollar against major currencies overseas and lower crude prices restricted the rupee’s fall, they added.

The rupee opened sharply lower at 69.57 as the US-China trade related concerns weighed on investor community. The local currency moved in a range of 69.47 to 69.74 before closing at 69.71, down 28 paise from the previous close.

The rupee has weakened by 49 paise or 0.71 per cent since Monday after the US’s threat to increase tariffs on USD 200 billion of Chinese imports triggered a global selloff in riskier assets.

“Growing trade tension between the US and China lead concern for global growth and trade. Chinese Yuan becomes the worst performer among Asian Currencies after US President Trump’s tweet on hiking tariff on Chinese goods from May 10,” V K Sharma, Head PCG & Capital Markets Strategy, HDFC Securities said.

The rupee came under intense pressure following continued weakness in domestic equity markets.

The BSE Sensex ended 487.50 points, or 1.27 per cent, lower at 37,789.13. The index hit an intra-day low of 37,743.07 and a high of 38,248.57.

Similarly, the NSE Nifty sank 138.45 points, or 1,20 per cent, to settle at 11,359.45. During the day, the bourse hit a low of 11,346.95 and a high of 11,479.10.

Foreign investors were net sellers in capital markets Wednesday pulling out assets worth Rs 701.50 crore on a net basis, provisional exchange data showed.

Meanwhile, the Dollar Index which gauges the greenback’s strength against a basket of six currencies, fell 0.11 per cent to 97.52.

Brent crude futures, the global oil benchmark, fell 0.53 per cent to USD 69.51 per barrel.

Meanwhile, Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 69.6009 and for rupee/euro at 78.0124. The reference rate for rupee/British pound was fixed at 90.9002 and for rupee/100 Japanese yen at 63.23.