Rupee Sinks to 2-Year Low on Yuan Devaluation

Rupee Sinks to 2-Year Low on Yuan Devaluation

The Indian rupee fell over 1% to 64.92 per dollar on Wednesday, a level last seen in September 2013 when the country was struggling with high current account deficit.

The rupee’s tumble comes amid a sharp decline across emerging market currencies following the devaluation of yuan by the Chinese government.

“The devaluation of yuan has impacted all emerging currencies including rupee… Currencies with major trade with China have been more impacted,” said Ashutosh Khajuria, executive director of Federal Bank.

China on Wednesday allowed the yuan to fall sharply for a second straight day. The People’s Bank of China had billed Tuesday’s move as a free-market reform but experts suspect it could be the beginning of a longer-term slide in the exchange rate to make China’s ailing exports more competitive.

The rapid drop in the value of yuan — more than 4 per cent in the last two days — dealt a body blow to appetite for risky assets globally, with equities, currencies and commodities coming under selling pressure.

The BSE Sensex traded 100 points lower, while the 50-share Nifty index hovered around the key 8,400 levels. Shares in companies that export to China came under sharp selling pressure for a second straight day.

The rupee meanwhile is on track for its sixth straight day of losses.

The rupee can fall to 65.15 during the day and the trend will be bearish, said Mohammed Gaziani, technical analyst with Nirmal Bang Securities.

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