Hit by rising global crude prices and a worsening trade deficit, the currency market on Tuesday witnessed volatility with the rupee to end at a fresh two-week low of 64.04 against the US dollar.
Recording its biggest single-day crash in eight months, the Indian currency on tuesday lost a whopping 55 paise, or 0.87%, in highly volatile trade. Overall forex sentiment soured after the country’s trade deficit widened to a three-year high on higher oil and gold imports.
India’s exports rose at a healthy pace in December by 12.36 per cent to $27.03 billion, but imports surged significantly to $41.91 billion, up 21.12 per cent, widening trade deficit to $14.88 billion, up about 41 per cent year-on-year.
On the international commodity front, global crude prices consolidated recent gains at around $70 a barrel on Tuesday, a level not seen since 2014. Brent crude futures were trading weak at $69.51 a barrel in early Asian trading.
In early trade, the rupee opened with down at 63.60 against Monday’s close of 63.49 at the Interbank Foreign Exchange (forex) market and remained under immense pressure throughout the session. The rupee to hit a new low of 64.15 in volatile intra-day trade amid unease in currency trading floors.
It finally settled at 64.04 after briefly hitting a low of 64.15, revealing a steep loss of 55 paise, or 0.87 per cent.
The big fall came despite broader weakness in the greenback against other currencies.
The benchmark BSE Sensex dropped 72 points to close at 34,771.05, while Nifty shed over 41 points to 10,700.45.
The rupee also posted losses against the pound, closing at 88.11 against 87.46 on Monday, and fell to at 57.86 per 100 yen from 57.41 the previous day. the Indian currency also drifted against the euro to close at 78.22 compared to 77.87 on Monday.
On the global front, the dollar staged mild recovery from sharp losses posted against other major currencies, but gains were expected to remain limited and the greenback was still trading within close distance of a three-year trough.
The benchmark six-month premium payable in June gained to 128-130 paise from 127-129 paise and the far forward December 2018 contract also edged up to 266-268 paise from 264-266 paise previously.