Indian rupee hits record low
dubai — The Indian rupee plunged past 69 against the dollar for the first time to reach a historic low of 69.05 and hit 18.80 per dirham on Thursday.
The rupee suffered 43-paise knock against the US currency as upbeat comments on the US economy by the Federal Reserve chairman drove the greenback to one-year high levels higher against global currencies. This is the biggest single-day fall since May 29 and goes hand-in-hand with a stronger US dollar, currency experts said.
The dollar index, which measures the greenback’s value against a basket of six major currencies, was up at 95.39.
In the cross-currency trade, the rupee also fell back against the pound sterling to finish at 89.69 per pound from 89.39 and dropped against the euro to close at 80.05 compared to 79.72 earlier.
The last time the rupee hit an all-time closing low of 68.9413 was on July 5. It touched alltime intraday low of 69.0925 on June 28.
Analysts attributed the relentless fall of the currency of Asia’s third largest economy to the country’s worsening external position amidst tightening global financial conditions as dollar strength has resulted in the rupee weakening to an alltime low.
The rupee has weakened 7.4 per cent so far this year, while foreign investors have sold $964.30 million and $6.36 billion in the equity and debt markets, respectively.
Analysts said the persistent strength in dollar combined with higher oil prices has been increasing the demand for the US currency in India. Some analysts even predict the rupee fall could be up to 70 per dollar by December-end.
Concerns relating to US-China trade conflict is reported to be hurting investor sentiment in most emerging markets. Indian rupee and its stock indices are no immune to this international economic surprise. A weak rupee against the dollar makes imports costlier. Some imports cannot be cut down such as oil, which can negatively affect India’s current account deficit. This triggers in inflationary concerns, a further negative factor for weaker rupee, they said.
The Indian currency suffered a major setback as forex sentiment turned wobbled once again with a resurgent dollar and a slew of local issues sparking jitters among investors. The US dollar surged to fresh one-year high after the Fed chief’s testimony to the US Senate on Wednesday bolstered the expectations of interest rate hikes, though gradually. The two-year Treasury yield was near the multi-year high mark of 2.624 per cent, hitting appeal of emerging market currencies. Indian Parliament will on Friday debate a no-confidence motion tabled by opposition parties against Prime Minister Narendra Modi’s government, which weighed on forex market sentiment.
Traders and speculators saw no signs of intervention by monetary authorities into the foreign exchange market to support the local currency, pushing the Indian currency down to a low of 69.07 in day trade. The rupee had touched an all-time low intra-day low of 69.10 on June 28 but had recovered later on suspected RBI intervention. The market mood has somewhat worsened as China steps up its game against the US after the People’s Bank of China devalued the Yuan once again in what many see as a move against the US.
Most Asian currencies also dropped against the dollar on as concerns over a tariff war between the US and China endured, keeping investors cautious on regional trades. Extending its overnight bearish undertone, the rupee resumed substantially lower at 68.72 at the Interbank Foreign Exchange (forex) market on heavy demand for the American unit from importers and local banks.
It later took a deep slide to hit a session low of 69.07 in late afternoon trade before ending at 69.05, showing a sharp fall of 43 paise, or 0.63 per cent.