Rupee slips below 68-mark v/s dollar

The rupee went into a tailspin by plunging 56 paise on Tuesday, the second biggest single-day fall of 2018, to end at a new 16-month low of 68.07 as panic dollar demand rattled currency market.

It has been in a virtual free fall for the Indian unit which settled a hairs breadth below its intra-day low of 68.15 a dollar. This is the lowest closing for the rupee since January 24, 2017 when it had ended at 68.15 against the US dollar.

A slew of domestic and external factors has made the fundamentals unfavourable for the rupee - including a massive trade balance deficit and a declining level of foreign direct investment (FDI).

Overall forex market has been hampered on the heels of the boiling global crude prices - its highest advances since 2014 is squeezing the carry-trade returns on the rupee to a point where they are the worst in Asia.

Crude prices hit a 3-year high supported by tight supply and planned US sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East

The Brent crude was trading at $78.96 a barrel in early Asian trade. India being a net crude oil importer, a rise in prices can affect the import bill and disrupt the fiscal position, derailing growth potential. Hardening prospect of a series Fed rate hike this year along with exodus of capital outflows were the other major trigger points exerting pressure on the rupee, a forex dealer commented.

The trouble is that a freefall in the currency would lead to a wave of corporate bankruptcies and rating impact on these companies as they have kept most of their foreign currency exposures unhedged largely betting on rupee stability, a forex dealer warned.