At 2pm, the rupee was trading at 66.78 against US dollar, down 0.62% from its Tuesday’s close of 66.11

The Indian rupee on Wednesday weakened near 14-month low against US dollar as foreign investors continued to sell in the local equities and bonds amid a surge in international crude oil prices and US bond yield.

At 2pm, the home currency was trading at 66.78 against US dollar, down 0.62% from its Tuesday’s close of 66.11. The rupee opened at 66.47 and touched a low of 66.81 a dollar—a level last seen on 9 March 2017.

Oil rose to the highest level since late 2014 and the US treasury 10-year yields climbed above 3% on Tuesday for the first time in four years.

Many brokerages have started cutting forecast of rupee. ICICI Bank Global Markets expects that the currency to hit 67 mark in the near term while CARE ratings sees rupee rate between 66.5-67 a dollar by March 2019.

Standard Chartered Plc, Australia & New Zealand Banking Group Ltd, TD Securities and Malayan Bank have pared their targets for the currency. Kotak Mahindra Bank Ltd has gone so far as to say that the rupee could fall past its 2016 record low of 68.89 per dollar if global and local risks play out, Bloomberg report said.

“Given the current environment of rising crude oil prices and concerns about the domestic macroeconomic landscape, we do not rule out the Rupee pair testing the 67 levels in the near-term. The RBI could step-up intervention to ensure that depreciation is not disorderly”, said ICICI Bank Global Markets in a note.

Bond yield hits near two month high. Yields on 10-year government bond stood at 7.752% from its previous close of 7.686%. Bond yields and prices move in opposite directions.

Since the start of April, foreign institutional investors (FIIs) have sold nearly a combined $2.05 billion in equity and debt market.

“The rise in crude oil prices is putting pressure on sources of India’s macro stability—low inflation, and lower current account and fiscal deficits—and weighing on the rupee. Higher oil could spell more depreciation than we had expected,” said Abhishek Gupta economist at Bloomberg.

Benchmark Sensex index fell 0.21% or 74.42 points to 34,542.22 points. Year to date, its up 1%.

So far this year, the rupee has fallen 4.3%, while foreign investors have bought $1.47 billion and sold $1.15 billion in equity and debt markets, respectively.

source: livemint.com