Global stock sell-off pushes Indian rupee to another record low
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MUMBAI, Aug 2 (Reuters) -The Indian rupee slipped to a record low on Friday, as local shares declined tracking the global stock sell-off caused by concerns of a slowdown in the United States and on rising geopolitical tensions in the Middle East.
The rupee INR=IN hit an all-time low of 83.7525 to the U.S. dollar, inching past its previous low of 83.7450 hit on Wednesday. The currency was down 0.04% at 83.7450 on 2:45 p.m. IST.
The rupee has weakened about 0.7% since the surprise outcome of India's elections on June 4, even though equity and debt markets have drawn more than $10 billion in inflows on expectation of economic growth and a lower fiscal deficit.
It has slipped to record lows in seven of the last 10 sessions, including Friday.
India's central bank, however, has chosen to buy dollars from the market to prevent an appreciation in the rupee, which traders believe is to correct an overvaluation of the currency's real effective exchange rate against trading partners including China.
The country's foreign exchange reserves have risen by $15 billion to a record high of $670.8 billion between the weeks ending June 7 and July 19.
The central bank "may want to avoid a loss of competitiveness by buying USD to prevent undue strength in the INR, especially as India attempts to move its economy up the value chain", Barclays Bank said in a note.
On Friday, the central bank likely sold dollars via state-run banks to prevent a sharp decline, traders said, as the rupee was pressured by likely outflows from local equities.
India's equity benchmarks, the BSE Sensex .BSESN and Nifty 50 .NSEI, were down more than 1% each on the day.
Investor sentiment soured after weaker-than-expected U.S. factory data prompted growth concerns while tensions about a widening conflict in the Middle East weighed.
Futures implied Wall Street's S&P 500 would open more than 1% lower after declining in the previous session.
The dollar index was down 0.2% at 104.2 while most Asian currencies gained between 0.1% to 1.8%.
The rupee is expected to continue depreciating gradually and trade in a 83.57-83.77 range with RBI interventions limiting volatility, Dilip Parmar, a foreign exchange research analyst at HDFC Securities said.
Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala
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