DNA Money Edit: Rupee’s fall amid trade war, crude spurt
Chinese President Xi Jinping has vowed to fight it with tariffs of up to 10% on an additional $60 billion worth of American goods, in a clear indication of trade war escalation.
Trade war between the US and China and an expected spurt in crude oil price have driven rupee to another life-time low of 72.97 on Tuesday. What is now clouding the prospect of rupee is Beijing’s retaliatory move. Close on the heels of Trump’s threat with new tariffs on $200 billion worth of Chinese exports, Chinese President Xi Jinping has vowed to fight it with tariffs of up to 10% on an additional $60 billion worth of American goods, in a clear indication of trade war escalation. China said it will take counter measures in order to safeguard its legitimate rights and interests and the global free trade order.
Meanwhile, the report that Saudi Arabia is now comfortable with Brent trading above $80 per barrel as the global market adjusts to the loss of Iranian supply also dampened sentiments in the money market.
Rupee’s fall towards 73 per dollar was primarily driven by these two factors that are beyond the government’s control. Reportedly, the offshore demand was exceptionally heavy. Domestic triggers seem to have failed to stem the market slide despite the government announcing several measures to contain current account deficit and cleaning up the banking sector through consolidation of public sector banks. Analysts believe that the situation will ease once the global bond and currency market stabilises.