The rupee on Monday crashed by Rs 1.08, or 1.57 per cent, and moved closer to the 70 level to end at a historic low of 69.91 against the US currency as the Turkish currency, lira, plunged, sending global currencies into a tailspin. The benchmark Sensex also logged its second straight session loss, plunging over 224 points to a near two-week low of 37,645 on massive sell-offs mainly in financial stocks.
The US dollar strengthened against world currencies after the Turkish lira dived almost 18 per cent, sparking a sell-off in global markets.
“With the recent inflation data being favourable, there has not been any material change in the Indian economy’s base parameters. The current drop in the rupee is due to the crisis in Turkey. Dollar index has strengthened beyond 96 levels reflecting its safe haven status. The rupee can see further dip till 70.25 levels on the other side, we could be seeing 69.60 levels if today’s favourable inflation data is backed by a moderation in the awaited trade deficit figures,” said Salil Datar,CEO & Executive Director, Essel Finance VKC Forex.
Forecasting that the rupee may fall to 70 levels against the dollar soon, dealers said the RBI will not be comfortable at the current rupee level. The RBI supported the rupee by selling dollars in the market.
The Turkish lira has lost over 40 per cent against the dollar this year, largely over worries about President Tayyip Erdogan’s influence over the economy, his repeated calls for lower interest rates, and worsening ties with the US. On Friday, the lira dropped as much as 18 per cent, hitting US and European stocks as investors took fright over banks’ exposure to Turkey.
The fresh lira collapse on Sunday night hit Asian shares, weakened South Africa’s rand and drove demand in global markets for safe currencies including the dollar, Swiss franc and yen.
The rupee had opened strong by 41 paise at 68.42 against the US dollar in early trade Monday, helped by revived sentiments following optimistic macroeconomic outlook. However, it soon plunged to a low of 69.62 in line with weakening domestic equities and meltdown in global markets. Suspected RBI intervention helped it recover from heavy losses, but heavy dollar demand pushed the rupee to close at all-time low level of 69.91, a fall of Rs 1.08 or 1.57 per cent over the previous close.
The NSE Nifty too fell by 73.75 points to end at 11,355.75. “Flare-up of tensions between the US and Turkey hit global financial markets by surprise and the ripple effect has seen in domestic market too. Despite upbeat June IIP growth of 7 per cent, weak global cues and deprecating INR led investors to book profits. However, considering revival in corporate earnings, declining oil prices, improving domestic macros and reversal in FIIs flows, the downside for the market is largely protected,” Vinod Nair, Head of Research, Geojit Financial Services said.
SBI fell 3.17 per cent after the lender reported a hefty loss of Rs 4,876 crore for the June quarter. Punjab National Bank, Yes Bank, Bank of Baroda, Federal Bank, Axis Bank, HDFC Bank and ICICI Bank fell by up to 3.37 per cent. Vedanta fell 3.40 per cent, followed by SBI 3.17 per cent, Yes Bank 3.11 per cent, Axis Bank 1.68 per cent, ONGC 1.60 per cent, Power Grid 1.52 per cent and HDFC 1.48 per cent.