RUPEE FALLS MOST IN EIGHT MONTHS ON TRADE DEFICIT

MUMBAI: The Indian rupee on Tuesday weakened 0.9%, its steepest fall in eight months, against the US dollar after the country’s trade deficit widened to a three-year high on higher oil and gold imports.

The home currency ended at 64.04 a dollar, down 0.86%, its biggest fall since May 18, 2017, from its Monday’s close of 63.49. The rupee opened at 63.63 a dollar and touched a low of 64.11, a level last seen on December 28, 2017.

Trade deficit widened to $14.88 billion in December as compared with $10.50 billion from a year ago, government data showed on Monday. Merchandise imports surged nearly 21.1% last month year-on-year to $41.90 billion. Meanwhile, exports grew 12.4% year-on-year to $27.03 billion.

“Overall, these numbers suggest that while exports benefit from a stronger global uptrend and fading domestic constraints, a larger commodity bill (mainly oil) could deteriorate the trade balance anew. December’s numbers also rekindle concerns over the current account balance this year,” said Radhika Rao, economist at DBS Bank Ltd.

“The trailing current account deficit balance has now widened to -2.5% of GDP for the December quarter, worsening from -1.2% in July-September. This suggests that the full-year current account deficit might be worse than our forecast of -1.8% of GDP vs -0.7% in FY17 and average between 2-2.2%”, the report added.

Bond yield rose over 11 basis points to hit a near three-week high after Reserve Bank of India deputy governor Viral Acharya said it can’t repeatedly manage the interest rate risks of lenders, as banks suffer from a bond market rout into its sixth month.