Traders shorting rupee on lack of confidence

The rupee on Tuesday plunged further against the US dollar to close 46 paise lower at a record low of 72.97 as government measures announced last week failed to boost sentiment in the forex market. Investors are now pinning their hopes on the Reserve Bank of India (RBI) to raise interest rates at least two more times this year. Extended weakness in the rupee came on the back of rising crude oil prices and concerns on the intensifying US-China trade war front.

US president Donald Trump has announced that he will impose tariffs on $200 billion of Chinese goods, signalling that the trade jitters will continue to hang over global financial markets for the time being.

“We believe policy action will need to get the sequencing right in order to be effective; we expect a 50bps rate hike in 4Q,” said Pranjul Bhandari, chief India economist at HSBC Global Research.

Reuters said quoting a forex dealer, “Crude prices went up and suddenly people started shorting, that shows there's no confidence in the rupee. The RBI sold about $400 million to $500 million to calm markets, but that didn't work.”