The dollar began to strengthen after the US and China agreed to drop their tariff threats while they work on a wider trade agreement
Reserve Bank of India (RBI) continued to intervene in the forex market to protect the rupee as it continued to slip lower to Rs 68.16 against the dollar.
The Indian unit closed at Rs 68.12 on Monday as the dollar began to strengthen after the US and China agreed to drop their tariff threats while they work on a wider trade agreement.
The US treasury yields also rose higher than 3%, strengthening the dollar and impacting flows to emerging markets. The political climate in India became uncertain after the trust vote in Karnataka was called off by BJP.
Jamal Mecklai, chief executive officer, Mecklai Financial, said, "The rupee is sliding down and there seems to be very little support whether from the political situation, of the strong resistance of the dollar the oil price and the global markets. RBI's interventions are no relief. It is difficult to predict whether the rupee will go below its lifetime low, but certainly there is hardly any factor that will support it."
"US teasury secretary Steven Mnuchin said the US trade war with China is"on hold", boosting risk sentiment amid hopes for an easing of trade tensions between the world's two biggest economies. The dollar rose 0.2% to 110.99 yen in early Asian trade, nearing a four-month high of 111.085 yen set on Friday," IDBI treasury said in a report.
RBI may also be running out of its reserves. India's forex reserves fell for the fourth consecutive week with the forex reserves at $417.7 billion as on May 11, 2018. The fall in reserves, currency experts said, was due to RBI's interventions in the market.
The rupee has fallen more than 6% against the dollar in 2018 after strengthening 6.4% in 2017, with the fall being about 2% for May 2018.
The dollar index against a basket of six major currencies set a fresh five-month high on Monday, touching a peak of 93.86 at one point. The euro slipped to $1.1744 at one point, touching its lowest level in five months, and was last down 0.2 % on the day at $1.1747.
DOLLAR IS KING
- The dollar began to strengthen after the US and China agreed to drop their tariff threats while they work on a wider trade agreement
- The US treasury yields also rose higher that 3%, strengthening the dollar and impacting flows to emerging markets
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RBI may also be running out of its reserves. India's forex reserves fell for the fourth consecutive week with the forex reserves at $417.7 billion as on May 11, 2018. The fall in reserves, currency experts said, was due to RBI's interventions in the market.
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