Rupee closes lower against US dollar as trade deficit widens

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Mumbai: The Indian rupee weakened against the US dollar on Friday after nation’s trade deficit widened to 56-month high on higher oil and gold imports. Fall in local equity market also dampened sentiment.

The home currency closed at 64.22, down 0.35% from its previous close of 63.91. The local currency opened 63.89 and touched a high and a low of 63.82 and 64.23, respectively.

Trade deficit widened to $16.29 billion in January as compared with $14.88 billion from a year ago, government data showed. Merchandise imports surged nearly 26.1% last month year-on-year to $40.68 billion. Meanwhile, exports grew 9.1% on-year to $24.38 billion.

Local market fell following losses in the banking shares after $1.8 billion fraud in Punjab National Bank weighted on the investor sentiment.

India’s benchmark Sensex index fell 0.84%, or 286.71 points, to 34,010.76. So far this year, Sensex fell 0.14%.

India’s 10-year bond yield ended at 7.579% compared to its Thursday close of 7.573%. Bond yields and prices move in opposite directions.

Reserve Bank of India (RBI) on Thursday said that it stands ready to inject adequate additional liquidity to address any demand on account of increase in currency in circulation and advance tax payments by companies and to provide flexibility to the banking system in its liquidity management towards March-end.

Since the beginning of this year, the rupee has fallen 0.54%, while foreign institutional investors have bought $1.04 billion from local equity and $1.86 billion in debt markets.

Asian currencies were trading higher. South Korean won was up 0.86%, Indonesian rupiah 0.42%, Thai baht 0.18%, Taiwan dollar 0.16%, Singapore dollar 0.11% and China offshore 0.1%. However, Philippines peso was down 0.21% and Japanese yen fell 0.06%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 88.468, down 0.14% from its previous close of 88.593.livemint