Currency closes at 68.79 as suspected RBI intervention helps recovery
Mumbai : Continuing its free fall for the fourth straight session, the Indian rupee on Thursday hit a record closing low of 68.79, showing a fall of 18 paise against the US dollar due to multiple headwinds like weak global cues and concerns related to inflation and fiscal slippage.
The domestic currency’s previous all-time closing low was 68.73, touched on November 24, 2016.
The beleaguered Indian rupee crashed to breach the key psychological level of 69 in the morning trade and slipped further to hit a life-time low of 69.10, a fall of 49 paise during the volatile session on Thursday.
The RBI is suspected to have sold dollars through state-run banks at around the 69.09 level, traders said. They were hopeful of larger dollar sales to prevent sharper falls in coming days.
The partially convertible rupee, however, was propped up by dollar selling intervention, closing at 68.79/80 versus the previous close of 68.65/66.
“Weak global cues and rising oil price continued to impact domestic market sentiment while rupee fell to all-time low amid concern on inflation and current account deficit… Any intervention from RBI to contain the volatility in rupee and progressing monsoon will provide some respite to domestic market in the near term,” Vinod Nair, Head of Research, Geojit Financial Services, said.
Mad rush for dollar was witnessed as importers see further erosion in the rupee value even as it was a field day for speculative traders before the RBI came in strongly, pumping million into the market to salvage the rupee.
The macroeconomic picture of India appears to be caught in a recurring instability against the backdrop of surging global crude prices and consistent widening in the trade deficit as well as increased pressure from capital outflows, all these leading to largely forex market turmoil.
“The fall in the rupee was led by higher oil prices and rising trade war tensions between US and China,” HDFC Bank analysts wrote in a note.
“In the near term, the rupee is likely to be under pressure as oil prices continue to remain high, capital outflows from emerging economies continue and trade war tensions keep markets jittery,” they said. So far this year, foreign investors have sold a combined USD 7 billion in equity and debt markets. An internal factor that has impacted the rupee includes a massive trade balance deficit and declining level of foreign direct investment (FDI).
Highly volatile local equities in the midst of option expiry along with overwhelmingly bullish dollar versus major currencies also weighed on the trading front.
The Indian rupee, which strengthened 5.96 per cent against the US dollar last year, has been on a general downtrend since April this year. Brent crude futures, an international benchmark, is trading sharply up at $78 a barrel, in early Asian trade.
The RBI, meanwhile, fixed the reference rate for the dollar at 68.9389 and for the euro at 79.6382. Globally, the dollar was trading near eleven-month high against a basket of the other major currencies.
