Rupee crumbles below the key 68-mark

The rupee on Friday crumbled below the key 68-mark to end at a fresh three-week low of 68.01 against the US currency after the country's trade deficit widened more than expected amid renewed global trade war fears.

Panic dollar buying sent the home currency to a low of 68.04 in day trade before settling the week at 68.01 peer dollar, down by 39 paise or 0.58%. This is the lowest closing for the rupee since May 24.

The Indian currency was the hardest-hit among Asian currencies which suffered due to a strong US dollar and emergence of macroeconomic headwinds.

India's trade deficit widened to four-month high of $14.62 billion in May as imports surged nearly 15%.

Renewed trade war jitters look set to reclaim the spotlight further weighed on the trading mood as the US prepared to release a list of goods from China.

The US President Donald Trump has approved tariffs worth $50 billion on import of goods from China, triggering the possibility of a trade war between the world's two largest economies after Beijing vowed to immediately retaliate.

A rapid surge of capital outflows and the associated volatility too added pressure.

Currency traders turned cautious about possibility that the adverse US trade and faster-than-expected tightening of US monetary policy will have a substantial impact on the Indian economy.

State-owned banks and private lenders sold dollar likely on the behalf of the central bank to stem weakness in the local currency, a forex dealer said.

On global monetary policy front, the European Central Bank (ECB) said that it would phase out some of its easy-money policies on the back of an improving economic picture in Europe, while the Bank of Japan left policy rates unchanged.

On the energy front, crude prices traded almost steady ahead of an OPEC meeting in Vienna next week as two of the world's biggest producers, Saudi Arabia and Russia, indicated they were prepared to increase output.

Brent crude futures, an international benchmark, is trading up at $75.52 a barrel, in early Asian trade.

Bond markets, however, showed more resilience and bounced back sharply despite looming rate hike fears. The 10-year benchmark bond yield tumbled to 7.89% from 7.94%.

The rupee resumed with a gap-down at 67.90 against its overnight close of 67.62 at the interbank foreign exchange (forex) market on the back of strong dollar demand.

A follow-through weakness pulled down the home unit to hit a fresh intra-day low of 68.04 in late afternoon deals before ending at 68.01, showing a steep loss of 39 paise, or 0.58%.

For the week, it depreciated by 51 paise against the greenback.

The RBI, meanwhile, fixed the reference rate for the dollar at 67.9739 and for the euro at 78.6050.

The dollar index, which measures the greenback's value against basket of six major currencies, was down at 94.78 after scaling a high of 95.15 earlier.

In the cross currency trade, the rupee however recovered against the pound sterling to finish at 90.30 per pound from 90.79 and bounced back against the euro to end at 78.82 from 79.94.

It also regained some lost ground against the Japanese yen to settle at 61.45 per 100 yens as compared to 61.53.

In forward market on Friday, premium for dollar continued to rule weak owing to consistent receiving from exporter.