The rupee declined by another 30 paise to a fresh 28-month low at 67.59 against the dollar in the wake of sustained foreign capital outflows and sharp fall in equities triggered by the plunging crude oil prices and the Chinese market woes. The rupee has lost 74 paise or 1.11 per cent in two days.
Economic Affairs secretary Shaktikanta Das said the government and the Reserve Bank are closely watching the rupee movement, adding that it will stick to the fiscal deficit roadmap for this year as well as the next. “Finance ministry and RBI (are) keeping close watch on currency movements. Current account deficit is expected to be in the range of 1-1.3 per cent in current year… well under control,” Das tweeted.
It’s not only the rupee but other comparable currencies too are depreciating against dollar, he said, adding that the “positive for India is that the CAD is well under control.”
The Indian currency had last settled at 67.63 on September 3, 2013 and during the intra-day trade at 68.62 on September 4, the same year.
“Sustained capital flows are pulling the rupee down. FIIs have pulled out Rs 3,484 crore in the last two weeks. The fall in the rupee will offset some of the gains from the crude oil price fall,” said an analyst.
The combination of sliding oil prices and China concerns delivered another knock to commodity-linked currencies. The Canadian dollar fell to 13-year low at C$1.4545 against its US counterpart, while the Australian dollar fell to its lowest in almost seven years at $0.6870. The US dollar was weaker against the euro and the yen, helping push the dollar down marginally to 98.980.
China’s yuan, meanwhile, weakened sharply offshore, opening up a gap of more than 1 per cent with the steady onshore market, despite central bank efforts earlier in the week to squeeze out speculators. Yuan’s fall has triggered fears of a currency war. Indonesia and Thailand’s currencies have fallen 9 per cent and 10 per cent, respectively, over the past year. Vietnam and Taiwan’s too have declined 4 per cent and 6 per cent. By devaluing its currency, China gains an advantage in global trade. Its exports become cheaper, and more attractive, to foreign buyers. To stay competitive against China, its trade partners — mostly in Asia — devalue as well to maintain a cheaper currency.
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