Rupee in year’s worst losing streak on Brexit, Rajan woes

Gains 16 paise vs dollar

Mumbai, June 30: The rupee completed its longest stretch of monthly losses in a year as global funds exited local bonds amid the uncertainty created by Brexit and Reserve Bank of India governor Raghuram Rajan’s decision to leave the central bank.

The rupee’s third straight month of declines was spurred by its biggest loss in 10 months on June 24 as the UK voted to quit the European Union. Foreign funds have reduced their holdings of rupee debt by Rs 6,830 crore ($1.01 billion) in June, the biggest outflow since February, data from National Securities Depository showed.

Asia’s second worst-performing currency this year also came under pressure following Rajan’s announcement on June 18 that he’d leave when his term at the Reserve Bank of India ends in September, triggering concerns about the continuity of policies aimed at targeting inflation and stabilising the currency.

“Surging risk-aversion due to Brexit and earlier concerns about Rajan’s departure weighed on the rupee,” said Abhishek Goenka, chief executive officer at Mumbai, June 30: Extending gains for the second straight day, the rupee on Thursday strengthened by 16 paise to close at 67.52 against the US currency on persistent dollar selling by banks and exporters amid firm stock markets.

Dollar selling on hopes of more foreign funds inflows into equity market supported the rupee rise, dealers said.

A weak dollar overseas also supported the rupee sentiment, they added.

The rupee opened sharply higher 67.55 per dollar against Wednesday’s closing level of 67.68 per dollar at the Inter- India Forex Advisors in Mumbai. The rupee will be on a weaker footing going forward as the risk-off sentiment will probably pick up again, he said.

The rupee retreated 0.4% in June and 1.9% this quarter to 67.5250 a dollar, prices from local banks compiled by Bloomberg showed. The currency has weakened 2% in 2016, Asia’s worst per- bank Foreign Exchange (Forex) market. It hovered in a range of 67.4750 and 67.72 per dollar before ending at 67.52 per dollar, showing a gain of 16 paise or 0.24%. The rupee had gained by 43 paise or 0.63% in two days. PTI former after the yuan.

Nomura Holdings reduced its year-end rupee forecast to 69.5 per dollar on June 24, compared with an earlier expectation of 67.6, while Standard Chartered sees it weakening to 68 per dollar, compared with an earlier call of 67.50. Mizuho Bank predicts the currency will weaken beyond 70 in the next three months. Bloomberg