Rupee breaches 79-mark
The rupee on Wednesday for the first time breached the psychologically significant level of 79 against the dollar on rising crude and commodity prices, a strong dollar overseas and deteriorating trade balance. Experts anticipate the local unit to gradually depreciate towards 79.50 to 80 levels over the next few months.
Ritesh Bhansali, vicepresident, Mecklai Financial Services said, “Today’s fall is because of the negative risk sentiments globally. Day before yesterday the US equity markets were down by more than 2 per cent. As a result, the Asian sentiments were also negative. So today’s fall is more in line with other Asian currencies as well. However, the rupee managed to close below 79 because of RBI intervention.”
“Also, there is a dollar shortage in the cash market. The forward premium has reduced from 4 per cent to 3 per cent. Because of this reduction, you are seeing liquidation of carry trades. The annualised forward premium currently is at a 10-year low which was last seen in
December 2011. History tells us that the rupee tends to depreciate whenever the forward premiums are at such low levels. The rupee will gradually depreciate towards 79.50 to 80.00 levels in the next three months because of the twin deficits,” added Bhansali.
The current account deficit could breach 3 per cent because of the increase in crude and commodity prices. The government is also likely to breach the fiscal deficit target of 6.4 per cent in 2022-23.
The spot rupee ended at 78.97/98, a new closing low against its previous close of 78.77, a fall of 20 paise. It opened at 78.85/86 level. During the session, the rupee touched an all-time low of 79.05 against the American currency.
On Tuesday, the rupee had plunged by 43 paise to close at the record low of 78.77 against the US dollar. The domestic currency has lost 1.97 per cent so far this month and has eroded a staggering 6.39 per cent since the start of this year.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.13 per cent higher at 104.64.
Global oil benchmark Brent crude futures advanced 0.34 per cent to $118.38 per barrel. On the domestic equity market front, the BSE Sensex ended 150.48 points or 0.28 per cent lower at 53026.97.
Gaurang Somaiya, forex & bullion analyst, Motilal Oswal Financial Services, said, “Dollar rose despite consumer confidence numbers released from the US came in below estimates...Today focus will be on the final GDP number; a better-than-expected number could support the dollar at lower levels.”