Rupee falls beyond 74 per US dollar: 5 things to know

rupee-vs-dollar

The Indian rupee today weakened past 74 levels against the US dollar after the Reserve Bank of India took control of capital-starved Yes Bank, increasing the risk-off sentiment fueled by increasing coronavirus cases in India. The rupee today traded in a range of 73.69 to 74.08 against the US dollar as compared to the previous close of 73.31. However, rupee pared some losses later and traded at 73.67 against the US dollar.

1) Denting the domestic risk sentiment, RBI on Thursday took control of Yes Bank, India’s fifth-largest private sector lender, and limited withdrawals to ?50,000 citing deterioration in the bank’s financial position. RBI has placed Yes bank under a moratorium, taking over from its board for 30 days and saying it would work on a revival plan for the lender. “RBI’s moratorium on Yes Bank is credit negative as it affects timely repayment of bank depositors and creditors,” said Alka Anbarasu of Moody’s Investors Service.

2) Yes Bank’s seizure by the government is coming at a time when India’s slowing economy is faced with issues of coronavirus, said Zephyr Financial founder Arjun Parthasarathy, as quoted by Bloomberg. “The effect of Yes Bank’s collapse will be felt across all markets with Sensex, Nifty falling sharply, rupee weakening and credit markets becoming more frozen and illiquid. There could be a flight to safety to government bonds.”

3) The Sensex also came under strong selling pressure today, falling over 1,400 points, with banking stocks particularly under pressure.

4) “The rupee has got spooked in offshore as well as onshore after news of moratorium on cap of deposit withdrawals ( ?50,000) from Yes Bank came in. Global risk sentiment too is extremely poor in the wake of increasing coronavirus cases worldwide,” said Abhishek Goenka, Founder & CEO, IFA Global.

5) Also weighing on the rupee, Asian currencies are weaker against the US dollar. Some corporate have said that a weaker rupee will push up their borrowing costs. HPCL chairman MK Surana today said that the falling rupee will push up its borrowing costs. The weaker rupee has pushed domestic gold prices to record highs today, closer to ?45,000 per 10 gram. (With Agency Inputs)

News Source:- livemint

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