Falls in Asian peers, Rupee crashes to 69 against US Dollar

Today, 28th June 2018, The Indian rupee recuperated marginally from its lifetime low to trade at 68.95 per dollar. There is a heavy month-end demand for the American currency from importers and banks hence in early trade today the rupee fell to an all-time low tracking Asian peers, with weakening macro-economic fundamentals on the domestic front also weighing on the currency.

The dollar gained more value overnight coupled with falls in Asian peers caused the drop in early trade, traders said, adding they were hopeful the central bank would step in to prevent further losses.

The rupee’s last record low was on November 24, 2016 with the value 68.8650 per dollar.

Having failed to extend overnight gains among conflicting signals from Washington on a proposal to restrict Chinese investment as the bitter US-China trade row kept financial markets on edge, the dollar was, however, steady against its peers.

This year the rupee was weighed over a widening current account deficit (CAD) due to higher global crude oil prices and steady capital outflows, only on the domestic front.

“Weakening at this pace shatters confidence. Markets expect RBI (Reserve bank of India) to manage the currency more effectively. The pressure on INR is high, thus in the absence of major action from regulators, 70 levels can be seen,” the head of currency and debt trading at a foreign bank said. “The RBI has been effectively managing (the rupee) over the years, and they do have ample firepower to manage sharp falls.”

As of June 15, latest RBI data showed that foreign exchange reserves stood at $410.07 billion.

Oil prices have been rallying for much of 2018 on tightening market conditions due to record demand and voluntary supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

From a year earlier, Economy’s March quarter CAD widened to $13.0 billion, or 1.9 per cent of GDP, from $2.6 billion, or 0.4 per cent of GDP. Despite the rise in CAD, it remains modest relative to GDP and is largely financed by equity inflows, including foreign direct investment (FDI), Moody’s said in a note on Thursday, adding that the large foreign exchange reserves provided a good buffer.

Moody’s added, “India’s low dependence on foreign-currency borrowing to fund its debt burden limits the risk of currency depreciation transmitting into materially weaker debt affordability.”

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