The Indian rupee on Tuesday weakened past the 63-per-dollar mark after India’s trade deficit widened due to higher gold imports.

Trade deficit widened to an 18-month high at $16.86 billion in November as merchandise imports rose at a much faster pace than merchandise exports, driven mainly by skyrocketing gold imports.

During the month, exports rose 7.27% to $25.96 billion, while imports increased by 26.8% to $42.82 billion. Gold imports during November jumped more than sixfold to $5.6 billion.

The rupee opened the session on Tuesday at 63.25 per dollar compared with its previous close of 62.95 and touched a low of 63.46—a level last seen on 13 November 2013. At 9.15am, the local currency was trading at 63.45 per dollar, down 0.79%. India’s benchmark equity index, BSE Sensex, was trading at 27,153.40 points, down 0.61%.

Most of the Asian currencies were trading mixed against the dollar. The South Korean won strengthened 0.61%, Japanese yen was up 0.27%, Singapore dollar 0.18%, whereas the Indonesian rupiah weakened 0.1%, Philippines Peso was down 0.34% and Thai Baht 0.11%.

The yield on India’s 10-year benchmark bond stood at 7.875% compared with its Monday’s close of 7.834%. Bond yields and prices move in opposite directions.

Since the beginning of this year, the rupee has weakened 2.35% against the dollar, while foreign institutional investors have bought $17.09 billion during the period from local equity markets. The fall in the Indian currency is not isolated. Emerging market currencies have fallen sharply over the last few days.

Overnight, the Russian ruble and Turkish lira plunged to record lows. In response, Russia raised its key interest rate to 17% from 10.5% to protect its currency. The Brazilian real, the South African rand and the Indonesian rupiah have also fallen to multi-year lows.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 88.344, down 0.13% from its previous close of 88.46.

The US Federal Reserve will start its two-day monetary policy review on Tuesday, which will decide whether to make a critical change to their policy statement that would widen the door for interest rate hikes next year, Reuters reported.

While RBI is said not to have intervened in the markets on Monday, the central bank has built up its reserves over time, should it need to defend the currency. India’s forex reserves stood at $314.66 billion as of 5 December.

Source:livemint.com