With Dollar Near 14-Year High, Indian Rupee Tumbles To A Five-Month Low Tuesday Nov 15,2016

The Indian Rupee and Sensex fell sharply on Tuesday Nov 15,2016, continuing their recent selloff since Donald Trump's victory in US elections.

The demonetisation of big notes also impacted the domestic market sentiment.

1) The rupee slumped as much as 50 paise to 67.75 against the US dollar on Tuesday as the greenback hovered near 14-year high against a basket of global currencies. 

2) This is the lowest value of the rupee in nearly five months.

3) The dollar index, a benchmark for the international value of the US dollar against a basket of six global currencies, was near trading near 100 on Tuesday.

4) The dollar has been on a tear since Mr Trump victory on expectations that inflation would rise in the US if the president-elect follows through on a pledge to spend big on infrastructure.

5) This has in turn fuelled speculation the US Federal Reserve will be forced to raise rates faster than expected to contain inflation. The US Federal Reserve meets next month to decide on interest rate.

6) Emerging-market assets, including currencies, are tumbling amid capital outflows since Mr Trump's victory. A rate hike in the US makes dollar assets attractive and could lead to outflows from emerging markets.

7) Since Mr Trump's shock victory last week, the Sensex has tumbled 4 per cent while rupee has fallen 1.6 per cent.  The MSCI's broadest index of Asia-Pacific shares outside Japan has fallen nearly 5 per cent.

8) The rupee also came under pressure as foreign investors sold Indian stocks heavily after Trump's victory. On Friday, foreign investors sold Indian equities worth Rs 1,500 crore.

9) Back home, analysts say that the move to demonetise big notes is likely to keep markets under pressure in the near term. They see a hit to the Indian economy in the short term.

10) The Sensex fell as much as 392 points in early trade to 26,426 while Nifty breached 8,200 levels.