Continuing its downslide for the third straight day,Indian rupee today plunged by 55 paise to close at 60.21 due to fresh capital outflows and sustained US dollar demand from importers,even as RBI intervened in the fag-end to arrest the currency fall.
The rupee commenced lower at 59.87 a dollar from previous close of 59.66 and immediately touched a high of 59.84 at the Interbank Foreign Exchange (Forex) market.
It,later,turned negative and tumbled to a low of 60.39 as global markets panicked on the back of multiple reasons including slowing Chinese growth,political tension in Portugal and the signs of issues in the Eurozone.
However,suspected RBI intervention helped the rupee to close a tad better at 60.21,showing a fall of 55 paise or 0.92 per cent over Tuesday’s closing level.
In three days,rupee has slumped by 82 paise or 1.38 per cent. Previously,it had registered closing all-time low of 60.72 and also an intra-day historic low of 60.76 on June 26.
Heavy dollar buying by importers,mainly oil refiners,following sharp rise in global crude oil prices weighed on the rupee. Brent oil hit one-week high of USD 105 a barrel.
N S Venkatesh Treasury Head of IDBI Bank said:” Rupee depreciated today as dollar strengthened against all major currencies. Also,equity market performance put some pressure on the domestic currency. However,we saw some selling of dollars from exporters and foreign banks.”
A weaker local currency can add to inflationary pressure,widen the fiscal deficit and slow capital inflows.
Meanwhile,the Indian benchmark S&P Sensex today slumped by over 286 points while FIIs sold shares worth Rs 705 crore today as per provisional data with stock exchanges.
The dollar index was down by about 0.20 per cent against a basket of six major currencies.
“The rupee was seen depreciating against the dollar and crossed the key level of 60.00. Globally,dollar sustaining above 83.50,Euro sustaining below USD 1.30 and weakness in the global stock markets continued to pressurize the rupee,” said Abhishek Goenka,Founder and CEO,India Forex Advisors.
“On the local front,sell off in the stock markets and the dismal service PMI numbers contributed to the weakness in the rupee. Today’s set of economic reports from the US will be very important for the US dollar and the rupee,” Goenka added.
Pramit Brahmbhatt ,CEO,Alpari Financial services (India) said rupee has depreciated over 0.9 per cent this week so far mainly taking cues from weak local equities.
“Rupee is expected to break record low of 60.76 and trade over 61 levels in coming days. The trading range for the Spot USD/INR pair is expected to be within 60 to 60.70,” he said.
However,experts said alongwith market intervention,announcement of new measures by the RBI may help calm the volatility on the rupee front. Yesterday,RBI proposed incremental provisioning and capital requirements for banks’ exposure to corporates having unhedged forex exposure,a moved aimed to ward-off any possibility of default by them.
India’s current account deficit reached a record high of 4.8 per cent of GDP in the 2012-13 fiscal year and a weak rupee would inflate value of imports adding pressure to CAD.
Meanwhile,premium for forward dollar remained firm on continued payments from banks and corporates.
Benchmark six-month forward dollar premium payable in December rose to 179-1/2-181-1/2 paise from Tuesday’s close of 175-177 paise. Far-forward contracts maturing in June also jumped to 359-1/2-361-1/2 paise from 347-1/2-349-1/2 paise.
RBI fixed the reference rate for the US dollar at 60.1005 and for the euro at 77.9505.
Rupee reacted sharply downwards against the pound sterling to 91.90 from overnight close of 90.43 while it dropped further to 78.02 per euro from 77.68.
Rupee dipped against the Japanese yen to 60.60 per 100 yen from previous close of 59.79.