Rupee hits 4-month low against US dollar: What's the reason?
What's the story
The Indian rupee has hit a four-month low, reaching 86.8725 against the US dollar. The fall was largely fueled by a weaker Euro and strong demand for dollars from state-run banks. A weaker rupee could make imported goods more expensive, potentially raising the daily living costs for consumers in the country.
Influencing factors
Rupee's fall exacerbated by euro's decline
The rupee's depreciation also reflects concerns over foreign capital outflows, weak corporate earnings, and the uncertain fate of a US-India trade deal. To note, the Euro tumbled over 1% against the dollar, strengthening the greenback globally and adding pressure on currencies like the Indian rupee. This week, all eyes are on the US Federal Reserve's decision which could further impact currency values.
Market trends
Dollar-rupee swap rates rising
Dollar-rupee swap rates are rising as anticipation of IPO-related cash inflows and the maturity of RBI contracts come due. The spot-week USD/INR swap rate was quoting an implied rate of around 0.60p per day, much higher than the prevailing overnight swap rate of around 0.30p.