The steps announced by the government to attract foreign inflows and support the rupee fell short of market expectations as the currency continued to weaken.

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The rupee ended the day’s trade on Monday at 72.51 to a dollar, down 0.90% from its previous close of 71.86. It  opened at 72.49 and fell to a low of Rs 72.69 as foreign investors deserted both Indian equities and debt.

“The weekend measures by the government to salvage the currency fell short of expectations. It was expected that if the measures are not strong enough, the rupee was bound to be under pressure,” said a currency trader with a public sector bank. The government also plans to restrict unwanted imports and boost exports. However, foreign investors had expected more concrete steps to prop up the rupee.

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Broad strength in the dollar amid reports that the US was likely to impose more tariffs on Chinese goods also weighed on the rupee, dealers said.

An analysis by IDBI Bank said that the dollar held above a recent 1-1/2 month trough against a basket of major currencies on Monday, with investors cautiously awaiting news on the implementation of the US tariffs on an additional $200 billion of Chinese imports. The dollar index held at 94.965 against a basket of major currencies, well above Friday’s 94.359, which was the lowest since end-July, the analysis showed.

“The dollar was last at 111.99 yen, within a kissing distance of Friday’s 112.16 which was the highest since mid-July. It gained 0.9% last week. The euro was last at $1.1624, down from a three-week top of $1.1721 set on Friday. The pound also retreated, dropping from last week’s peak of $1.3145 to trade at $1.3071,” said an IDBI Bank report.

Though there were talks of launching an NRI bond issue, the government unveiled a few measures that failed to attract the foreign portfolio investors.

Source: DNA Money