Indian Rupee Depreciates To Record Low Against U.S. Dollar

(RTTNews) - The Indian rupee weakened against the U.S. dollar in the European session on Friday, due to growing worries about India's foreign exchange reserves and the center's intention to raise import duties on gold and silver.

The Indian government declared early on Wednesday that import taxes on gold and silver would increase from 6% to 15%. In order to relieve strain on the country's foreign exchange (FX) reserves, the action was intended to deter the general population from buying precious metals. Indian Prime Minister (PM) Narendra Modi asked people to put off buying non-essential gold for a year this past weekend.

Investor sentiment seems to have been affected by the move, though, and questions have been raised over whether the Indian government has enough foreign exchange reserves to cover the cost of imports.

The Indian government earlier in the day announced an increase in petrol and diesel prices of Rs. 3 per litre. Since the Strait of Hormuz, a vital route to over 20% of the world's energy supply, is still closed due to tensions between Iran and the United States (US), the price of WTI oil has risen nearly 70% to $98 so far this year and is predicted to stay high.

After the U.S. President Donald Trump and the Chinese Leader Xi Jinping met, there were indications that trade relations between the U.S. and China were strengthening, which caused the U.S. to trade steadily.

The U.S. dollar is also benefiting from strong anticipation that the Federal Reserve (Fed) will either raise interest rates this year or keep them at their current levels in order to reduce high price pressures.

Against the U.S. dollar, the rupee fell to a record low of 96.03 from an early high of 95.71.

If the rupee extends its downtrend, it is likely to find support around the 97.00 region.

Looking ahead, Canada housing starts for April and manufacturing sales data for March, U.S. NY Empire State manufacturing index for May, U.S. industrial and manufacturing productions data for April and U.S. Baker Hughes oil rig count data are slated for release in the New York session.