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Risk of US hiking rates drowns rupee

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Mumbai: The Indian rupee plunged to a new two-year low of Rs.65.69 to a dollar during intra-day trade on the foreign exchange markets on Thursday following apprehensions of a US interest rate hike and the continuing slide in the Chinese markets.

The rupee, however, later gained strength and closed the day’s trade at Rs.65.56 to a dollar.

Thursday’s intra-day fall mirrors the currency’s movements on Wednesday — when it had hit a fresh two-year low at Rs.65.44 to a US dollar.
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According to analysts, the rupee was impacted by the possibility of US raising its interest rate after a decade of easy financing.

The intent was made clear by the minutes of the last Federal Open Market Committee (FOMC) meet which was held on July 28-29.

Higher interest rates in the US are expected to lead the FPIs (Foreign Portfolio Investors) away from emerging markets such as India.

The other major catalyst for the rupee’s fall has been the devaluation of yuan, intended to boost Chinese exports and arrest the fall in the Chinese markets by pumping up the economy.

“Today, the Chinese markets continued their downward movement despite various measures taken by the government there. This shows that the problem is deep rooted and the impact might be much greater,” Anand James, co-head, technical research, Geojit BNP Paribas, told IANS.

Though unrelated, the stock market crash can prompt China’s central bank to further devalue yuan to propel the domestic economy.

The People’s Bank of China had devalued yuan by two percent on August 11. This was the biggest devaluation in the Chinese currency since 1994.

The currency fell again dropped by two percent on August 12 panicking the world economy.

The attempt is viewed as a tack-tick to corner the international export markets from other emerging trading powers such as India and the Asean (Association of Southeast Asian Nations) grouping.

The move has strengthened the dollar value, which has negatively impacted major world currencies including the Indian rupee.

The yuan has fallen by 4.6 percent till now since August 11.

(IANS)

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Sri Lanka’s Prime Minister Gets Reinstated

A spokesman for Wickremesinghe said he was expected to form a Cabinet in the coming days, with priority given to the 2019 budget

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Sri Lanka, prime minister
Sri Lanka's ousted Prime Minister Ranil Wickremesinghe looks on during a parliament session in Colombo, Dec. 12, 2018. On Sunday he was reinstated as prime minister, ending a political crisis.

Sri Lanka’s sacked Prime Minister Ranil Wickremesinghe was reinstated Sunday, his party said, ending a 51-day crisis that had paralyzed the island nation and pushed it toward debt default.

The 69-year-old leader was sworn in by President Maithripala Sirisena, who sacked him Oct. 26 and triggered a power struggle that brought the country’s government to a standstill.

Wickremesinghe had refused to step aside since being sacked and replaced by former leader Mahinda Rajapaksa.

Power struggle won

Sri Lanka had drifted without a functioning government for nearly two months as the rival factions jostled for power in parliament and the courts.

Sri Lanka, Parliament, Prime minister
Supporters of ousted Sri Lankan Prime Minister Ranil Wickremesinghe celebrate outside the supreme court complex in Colombo. VOA

Sirisena had vowed to never reappoint Wickremesinghe, who he publicly castigated in speeches in recent weeks, as prime minister under his watch.

The acrimony between the two was underscored Sunday when Sirisena barred journalists from attending the swearing-in ceremony, leaving it to Wickremesinghe’s legislators to announce the appointment.

“We thank the citizens of the country who fought the illegal seizure of power and ensured that democracy was restored,” his United National Party of Sri Lanka posted on Twitter

President’s appointee failed

Rajapaksa, Sirisena’s appointee, was unable to govern, failing many times to muster a majority in parliament.

Sri Lanka, prime minister
Sri Lanka’s disputed Prime Minister Mahinda Rajapaksa gestures as he arrives for a meeting with his supporting lawmakers at the parliamentary complex in Colombo, Sri Lanka, Nov. 29, 2018. VOA

He was defeated six times on the floor of the legislature before being forced to step down Saturday.

Sirisena suffered a huge setback when the highest court in the country ruled last week that he acted outside the constitution when he sacked parliament in early November.

The court also confirmed Friday that Rajapaksa and his purported Cabinet could not exercise the powers of the office they held.

Also Read: President’s Dissolution of Parliament Unconstitutional: Sri Lanka’s Court

A spokesman for Wickremesinghe said he was expected to form a Cabinet in the coming days, with priority given to the 2019 budget, without which foreign debt servicing may not be possible.

Sri Lanka had been braced for a government shutdown as parliament failed to approve spending for 2019, and ratings agencies downgraded the country’s credit rating amid fears of a sovereign debt default. (VOA)