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 wide ned 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 wide ned 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 a new. 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.