MOODY’S: INDIA AMONG 5 LEAST AFFECTED NATIONS

■ Rupee rebounds after intervention of RBI in the currency market

The rupee sank to an altime low against the US dollar on Thursday as rising crude oil prices and trade tension between major economies continued to put pressure on emerging market currencies and equities.

The rupee slipped below the 69- level mark in the intra- day trade to hit a low of 69.09 a dollar before ending the day at 68.79, down 0.18 per cent from its previous sessions close of 68.61.

“Indonesia and India face similar headwinds in times of weak riskappetite. Investors are clearly sensitive to economies that face twin deficits, which underscore the need for ample financing support,” said Radhika Rao, economist at DBS Bank.

Markets participants fear that a rise in global oil prices would put pressure on India’s current account deficit and also stoke domestic inflation that could lead to further tightening of the monetary policy.

The rupee is the worst performing Asian currency in 2018 down 7.4 per cent followed by the Philippine peso and Indonesian rupiah, down 6.7 per and 4.3 per cent respectively.

While trade tensions and oil prices have triggered a global risk aversion towards emerging market currencies, Prathamesh Mallya, chief analyst, currency at Angel Broking said US asking India and other countries to stop oil imports from Iran by November 2018 or face sanctions further dented sentiments. ■

“A major sell- off in the domestic equity and debt markets has also added downward pressure on the Indian currency. So far this year foreign investors have sold $ 7 billion in equity and debt markets,” he said.

The equity markets extended their fall for the second consecutive trading session. The Nifty slumped 82.30 points or 0.77 per cent to end the day at 10,589.10 and the Sensex closed the session at 35,037.64, down 179.47 or 0.51 per cent.

According to the provisional data released by the stock exchanges, foreign portfolio investors sold shares worth ` 951.51 crore on Thursday. India is among the 5 countries including China which are least vulnerable to currency pressures amid strengthening of the US dollar as the country has low reliance on external capital inflows, Moody’s said on Thursday.

The report came on a day when rupee hit alltime low in intra- day trade against the dollar.

Since mid- April, the dollar has strengthened which has led to sharp currency depreciation and significant declines in forex reserves in a number of emerging and frontier market countries, increasing credit risks for those with large external funding needs, said Moody’s.

“Brazil, China, India, Mexico and Russia are among the least vulnerable to tightening external financing conditions because of their low reliance on external capital inflows,” it said.

It said that India’s limited external vulnerability is supported by a large and relatively stable domestic financing base for government debt, which contributes to the resilience by sheltering it from abrupt changes in external financing conditions.

“Although India’s debt affordability is relatively weak, the average maturity of debt is close to 10 years and over 96 per cent of it is in local currency,” said the report.