The rupee slipped 12 paise to 71.39 against the US dollar in the early morning trade on Friday. On Wednesday, the domestic currency rebounded from a six-month low to end at 71.27, up 13 paise.
The forex market was closed on Thursday on account of Independenece Day.
“The Indian rupee has now become Asia’s worst performing currency so far this month, Chinese yuan depreciated amid trade worries and foreign investor outflows,” said V K Sharma, Head-PCG & Capital Market Strategy at HDFC Securities.
However, a recent poll by Reuters suggested rupee will recoup this year’s losses against the dollar over the coming 12 months as the issuance of sovereign bonds in foreign currencies may help prop it up.
“In the second half of the year, what we are looking for is some sort of positive news on the US-China trade war and maybe a little bit more (rupee) gains if the sovereign bonds issuance comes through,” Reuters reported quoting Sakshi Gupta, senior Treasury economist at HDFC Bank, as saying.
On the domestic front, data showed India’s trade deficit was at $13.43billion as compared to $18.63 billion in the same period last year. Gold imports declined 42.2 per cent to $1.71 billion in July. Oil imports fell 22 per cent to $9.6 billion, while non-oil slipped by 6 per cent to $30.16 billion.
“Weakness in emerging market currencies also accelerated as the interest rates on some long-dated government bonds have fallen below the level for short-term debt. The inversion rattled investors already worried that a US-China trade war might trigger a slowdown in global growth. Today, USD/INR pair is expected to quote in the range of 71.10 and 71.80,” said Motilal Oswal Financial Services (MOFSL) in the daily currency report.
On the global front, Asian shares were heading for weekly losses on Friday as conflicting messages on the Sino-US trade war only added to worries for the global economy, while talk of aggressive central bank stimulus drove bond yields to fresh lows, said a Reuters report.
In the commodities market, oil prices were trying to bounce after two days of sharp losses. Brent crude futures added 23 cents to $58.46, while US crude rose 33 cents to $54.80 a barrel, the report added.