The rupee on Monday slipped to a seven-month low against a surging dollar as it closed at 61.53. The domestic currency, which had over the months stabilised to a below-60 level, dipped ahead of the Reserve Bank’s monetary policy review on Tuesday primarily due to a rise in dollar demand by importers and net outflow of funds by foreign institutional investors (FIIs).
Over the last four trading sessions, FIIs have pulled out a net of Rs 2,304 crore from Indian equities and an aggregate of Rs 4,105 crore from the debt and equity markets combined.
While the softening of global crude oil prices may offer the much-needed comfort to the RBI in terms of targeting inflation, a slip in the rupee against the dollar just takes away the advantage as a depreciating rupee will make imports costlier. It may be a cause of concern for the central bank that will meet on Tuesday for its fourth bi-monthly monetary policy review.
Over the last two months, while the Brent crude prices have softened by almost 10 per cent to below $97/barrel, rupee has depreciated by almost 3 per cent against the dollar.
At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 61.35 a dollar from previous close of 61.15. It immediately touched a high of 61.31 on initial firmness in local equities. However, later, it fell sharply to a low of 61.59 before closing the day at 61.53 with a fall of 38 paise or 0.62 per cent.
This is its weakest level since March 5, 2014, when it closed at 61.75. On Friday, the rupee rose by 19 paise or 0.31 per cent. Dollar has appreciated against other Asian currencies too. The Japanese yen headed towards the 110 mark after US data showed the economy expanded at its fastest pace since 2011 during the April-June quarter.
Following the FII outflow and decline in rupee, the equity markets too have fallen over the last one week. The Sensex had lost 2.2 per cent or 609 points over the last five trading sessions. On Monday the Sensex fell marginally by 29 points or 0.11 per cent.