The Indian rupee fell to its lowest level since January 2017, closing below the psychologically important mark of 68 against the US dollar.
The currency remained volatile through the session as markets digested the outcome of the state elections in Karnataka, where the ruling Bharatiya Janata Party won enough seats to become the single largest party but fell short of winning a majority. The political scenario added to the existing concerns like higher oil prices and outflows from the debt markets, pushing the local unit lower.
The rupee fell to an intraday low of 68.14 against the dollar before closing at 68.11 - down 0.86 percent from its previous close of 67.52.
The rupee’s fall was a knee jerk reaction to the Karnataka elections, said Jamal Mecklai, chief executive officer of Mecklai Financials. “The way the Karnataka elections have panned out, has created possibilities of domestic political uncertainty,” Mecklai told BloombergQuint.
While the day’s volatility may have been driven by politics, the Indian rupee has also depreciated in response to a change in global and domestic macro conditions.
Meanwhile, portfolio outflows have picked up. Foreigners have sold a net of Rs 22,071 crore in Indian debt so far this year. Total outflows from the debt and equity markets combined stand at Rs 17,096 crore.
The rupee has depreciated 6.22 percent against the U.S. dollar since the beginning of the year versus a 6 percent appreciation in 2017.
(This copy was first published on BloombergQuint and has been republished with permission.)
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