Rupee hits near 1-month low after Urjit Patel’s appointment as new RBI governor

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Mumbai: The Indian rupee on Monday weakened for the third consecutive session, to hit near-one-month low, against the US dollar, while 10-year bond yield gained, after the government appointed Urjit Patel as the new Reserve Bank of India (RBI) governor. The fall in global equity and currencies markets also dampened the sentiments.

According to a Mint report, with Patel being named as Rajan’s successor, any hopes of looseness in monetary policy will likely be extinguished. The incoming governor is not only the architect of the RBI’s new flexible inflation-targeting framework, but is also seen as someone who has little tolerance for inflation overshooting the RBI’s comfort zone. Patel-led RBI will likely choose to wait and watch before bringing down interest rates any further.

The rupee opened and touched a low of 67.20 a dollar, a level last seen on 27 July. At 9.12am, the home currency was trading at 67.19 a dollar, down 0.20% from its previous close of 67.06.

10-year bond yield was trading at 7.147%, compared with its Friday’s close of 7.102%. Bond yields and prices move in opposite directions.

India’s benchmark Sensex index fell 0.22% or 61.75 points to 28,061.69. So far this year, it has gained 7 .5%.

The rupee is down 1.3% till date this year, while foreign institutional investors (FIIs) have bought $5.77 billion in equity and sold $1.08 billion in debt markets.

Also Read: Urjit Patel: The hawk without a halo

Asian currencies were trading lower after Fed vice-chairman Stanley Fischer signaled the possibility of a US rate hike this year, reinforcing earlier comments by other officials. Fischer said over the weekend that the economy is close to meeting the central bank’s goals and that growth will pick up.

Fed chair Janet Yellen, scheduled to speak on 26 August at Jackson Hole, will also echo comments by New York Fed President William Dudley and Fischer for a rate hike by the end of the year, Bloomberg reported.

South Korean won was down 0.76%, Japanese yen 0.52%, Taiwan dollar 0.42%, Malaysian ringgit 0.42%, Singapore dollar 0.4%, Philippines peso 0.38%, Indonesian rupiah 0.33%, China offshore spot 0.25%, Thai baht 0.2% and China renminbi 0.18%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.82, up 0.33% from its previous close of 94.511.

On Friday, India’s Skymet lowered monsoon rain forecast to 100% from 109%. Rainfall during the June-September monsoon season will be about normal 50-year average of 89 centimetres, said Skymet weather services.