Weekly Review: Rupee suffers nasty blow; at fresh six-month low of 65.28 vs dollar

New Delhi: The rupee suffered yet another nasty blow – breaching the key psychological 65-mark to end at a fresh six-month low of 65.28 against the resurgent dollar on growing fears over mass funds exouds amid macro-economic headwinds.

Panic dollar buying from corporates and importers alongiwth fears over fund outflows from domestic capital market led to weakened forex market sentiment against the backdrop of imminent Fed rate hike and unwinding of its stimulus measures amid unsupportive global factors.

Scripting its third-straight weekly fall, the home currency depreciated by a steep 49 paise or 0.76 percent.

The US Federal Reserve reaffirmed its intention to hike rates in December and normalising its crisis-era stimulus programme into reverse from next month.

Hardening speculation of widening fiscal deficit after government indicated a package of stimulus package meant to jump-start the nation's ailing economy, put trading moode into further disarray.

The GDP expansion hit three-year low of 5.7 percent in the April-June quarter with India losing the fastest- growing economy tag to China for the second straight quarter.

Besides falling GDP growth rate, exports are facing strong headwinds and the industrial expansion hit the lowest in five years.

Highly volatile equities along with extremely strong greenback overseas also added pressure on the rupee front.

The Emerging market currencies also showed weakness.

Maintained its extreme bearish undertone, the rupee opened lower at 64.84 against last Friday's close of 64.79 at the Interbank Foreign Exchange market.

The follow-through weakness eventually pulled down the home currency to a new intra-day low of 65.89 as state-run and private banks stepped up dollar purchases for their importer clients.

However, forex market sentiment suddenly turned less volatile after the government stuck to its budgeted market borrowing for the year, easing concerns over widening fiscal deficit target amid suspected RBI intervention.

Rupee witnessed spectacular pull back rallies towards the fag-end week to recoup some lost ground.

It finally ended at 65.28 a dollar, revealing a steep loss of 49 paise, or 0.76 percent.

The Indian unit has lost 2.35 percent of value or 2.35 percent against the US currency.

Foreign portfolio investors (FPIs) have embarked on their largest selling spree in local equity market in 2017 so far and offloaded USD 1.048.17 mln this week.

After touching a record high, the foreign exchange reserves declined marginally by $262.3 million to $402.246 billion in the week to September 22, due to fall in foreign currency assets, the RBI (Reserve Bank of India) data showed.

Globally, the dollar was little changed against a basket of major currencies on Friday after conflicting U.S. macro data, leaving it on course for its largest weekly rise in 2017 amid a rise in expectations for inflation and U.S. interest rate hikes, helping the greenback to post its first monthly gain against its peers since February.

Highly positive comments from Fed and the release of a foundation for President Donald Trump's proposed tax overhaul also pushed inflation expectations higher.