Indian rupee drops sharply to nine month low

The Indian rupee on Tuesday dropped sharply to more than a nine-month low of 72.39 against the US dollar (against the Kuwaiti Dinar, the rupee closed at 237.4) as heavy sell-off in the domestic equity market, weak macro environment and a stronger greenback kept investors edgy.

The Indian currency came under pressure after official data released on Friday showed that India’s GDP growth fell to an over six-year low of 5 percent in the June quarter.

Besides, the growth of eight core industries dropped to 2.1 percent in July, mainly due to contraction in coal, crude oil and natural gas production.

The rupee opened lower at 72 to the US dollar at the interbank foreign exchange market and lost further ground to touch a low of 72.40 against the dollar.

The domestic currency settled down by 97 paise at 72.39 per dollar, logging its worst single-day fall since August 5 and the lowest closing level since November 13, 2018.

The forex market was closed on Monday on account of Ganesh Chaturthi.

US bank JPMorgan Chase & Co forecast in August that the Indian currency will hit 73/74 against dollar (240 vs KD) in the coming months, mainly due to waning internal and external growth.

Jonathan Cavenagh, head of foreign exchange strategy for emerging markets Asia at JPMorgan Chase, had said in August that the rupee was overvalued in real effective exchange terms.

Analysts blame weak macro-economic data, poor corporate performance and outflow of funds for the decline in rupee’s value. The dollar, and currencies pegged to it, has been strengthening against the emerging currencies since trade war erupted between the US and China.