Rupee trades lower against US dollar

NEW DELHI: The rupee dropped 8 paise to 66.40 against the US dollar in early trade on Thursday, in line with the weakness seen across Asian markets, after strong data released in the US overnight raised chances of a Fed liftoff in the forthcoming December policy review.

The domestic currency had closed 15 paise lower at 66.32 against the greenback on Tuesday on fresh dollar selling by banks and exporters. The domestic currency market was closed on Wednesday for a public holiday.

Data released overnight showed that the US jobless claims fell more than expected last week. Claims have now held below the 300,000 for 38 consecutive weeks to the levels last seen in the early 1970s. The US preliminary (flash) Markit services index, on the other hand, improved to 56.5 in November against 54.8 in October, raising further chances of a Fed liftoff in December.

The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, stood at 99.76.

“There is an increased perception about the divergence in monetary policies globally. That is really what has been driving the dollar higher. There are other aspects as well. A higher Fed funds rate is generally bad news for emerging markets currencies,” Klaus Baader of Societe Generale said in an interview to ET Now.

In the event of Fed rate hike, “The Indian currency might witness some volatility. But it is much better positioned now to withstand the impact of the hike. With strong fundamentals, it should perform relatively better than other global emerging market currencies,” said Akash Singhania of Deutsche Asset Management.