Declining for the sixth consecutive session, the rupee tumbled by 59 paise to almost 2-year low at 64.78 against the US dollar on sustained demand for the American currency from banks and importers on the back of firm greenback overseas following yuan devaluation. According to State Bank of India chairman Arundhati Bhattacharya, the devaluation of the Yuan would hurt Indian exports to China particularly yarn and Iron Ore. They plowed $882.4 million in July.
The dollar closed flat against the rupee in the interbank market, dealers said.
The government will release data on retail inflation and factory output later on Wednesday.
In addition to the these factors, falling borrowing costs make for a “great cocktail for a bull market”, Ramesh Damani, an investor and a member of the Bombay Stock Exchange Ltd, said in a Bloomberg TV India interview. A massive rout in currency and financial markets worldwide spooked by Chinese central bank’s policy move along side heightened concerns about capital outflows in the face of imminent US interest rate hike predominantly weighed on the local currency, a forex dealer said.
The bank said that starting on Tuesday, the daily target will be based on the yuan’s closing the previous day and information from traders about supply and demand for the currency. Coal India Ltd., the world’s top producer of the fuel, plunged the most in seven months before its results. Tata Motors, owner of Jaguar Land Rover, slid to its lowest close level since February 10, 2014. Tata Steel tumbled 5.5%, the worst performer on the Sensex.
The yield on sovereign notes due May 2025 was little changed from Tuesday at 7.79 per cent.