Rupee closes at new record low of 70.16 against US dollar

The rupee continued to weaken further to close at a new record low of ~70.16 against the US dollar on Thursday, reflecting the volatility in global currency markets triggered by the crisis in Turkey and concerns over India’s rising trade deficit.

The Indian currency opened above ~70 and stayed over that crucial threshold through the day’s trading, according to Clearcorp Dealing Systems data. It slumped to an all-time low of 70.40 per dollar (intra-day) on persistent foreign fund outflows but recovered subsequently.

Besides the upheaval in the international currency markets, weak data for India’s merchandise trade for July also shaped the sentiment, said foreign exchange dealers. Trade deficit expanded to $18 billion in July, from $16.6 billion in June, partly due to higher oil import bill.

“Things don’t look good for the rupee,” said Abhishek Goenka, chief executive officer, India Forex Advisors.

Emerging markets contagion, worries about current account deficit and weakness in yuan are likely to weigh on the rupee.

The present imbroglio in the political space will cause volatility depending on the direction in which the dollarTurkish lira value moves, said Madan Sabnavis, chief economist, CARE Ratings. “A value of ~69/$ should be the equilibrium, based on expected fundamentals in the rest of the year,” he said. This is predicated on expectation of a higher trade and current account deficits, but higher invisibles and improvement in foreign investments (both portfolio and direct) and maintenance of external commercial borrowings, he added.

The falling rupee was not a cause of worry as it was getting back to its natural value, said Rajiv Kumar, NITI Aayog vicechairman. "The rupee rose about 17 per cent during the last three years.