Rupee hits fresh low of 72.73, drops 28 paise against US dollar

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Indian bonds and the rupee slumped on Monday as emerging market assets came under renewed pressure amid the spectre of a rising dollar, higher crude oil prices and escalating global trade tensions.

The rupee opened at a new low of Rs 72.15 against the dollar at the Interbank Foreign Exchange market from its previous close of 71.73.

The local currency hit another record on Monday after data showed that India's current-account deficit widened to the most in five years.

India's current account deficit (CAD) widened to United States dollars 15.8 billion in April-June in value terms this year as against USD 15 billion in the same quarter of 2017-18, mainly due to a higher trade deficit, according to RBI data released Friday. Increased purchasing by importers, including oil refiners, amid a rise in crude prices and capital outflows also affected the Indian currency's value.

On Friday, the rupee had closed higher by 26 paise at 71.73 on heavy intervention by the Reserve Bank of India.

A report by global credit rating agency Moody's Investors Service mentioned that sustained weakening of the rupee was "credit negative" for Indian companies that rely on U.S. dollar debt to fund their operations but generate revenue in rupees.

The rupee also touched a life time low of 72.4450 to the dollar on Monday pressured by solid support for the dollar thanks to strong U.S.jobs data on Friday, which reinforced expectations of more rate hikes by the Federal Reserve.

"A sustained "weakening of the rupee would be credit negative for its rated Indian companies, particularly those that generate revenue in rupees but rely on the U.S. dollar debt to fund their operations and have significant dollar-based costs, including capital expenses", Moody's said".

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