By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee remained under pressure on Tuesday in the wake of a drop in the Chinese yuan and a fall in local equities amid foreign outflows.
The rupee was at 84.0775 to the U.S. dollar at 10:56 a.m. IST, unchanged from the previous session.
The offshore yuan dropped to 7.1582 to the dollar, its lowest in nearly three months, on uncertainties over the outcome of the U.S. election.
Meanwhile, Indian shares were down on Tuesday after a respite in the previous session. The benchmark NSE Nifty 50 shed 0.4% and is down just less than 6% this month.
India’s relatively expensive valuations amid a largely disappointing earnings season has prompted foreign investors to take out more than $10 billion from local equities this month so far.
Foreign outflows from Indian markets remain a “significant headwind” for the rupee, Amit Pabari, managing director at CR Forex, said, adding that the rise in U.S. Treasury yields is one more challenge for the domestic currency.
The Reserve Bank of India (RBI) has likely been selling dollars through public sector banks to help the rupee. The central bank intervened on Tuesday as well.
“They (RBI) are there again today, which is a surprise to absolutely no one,” a trader at a bank said.
“Nowadays, its just assumed that the RBI will be there and no one bothers at all.”
The yields on the U.S. two-year to 30-year bonds climbed to roughly three-month peaks on Monday. The prospect of Republican candidate Donald Trump winning the U.S. elections has prompted investors to exit U.S. Treasuries.
(Reporting by Nimesh Vora; Editing by Sonia Cheema)
