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Journalism of Courage
MUMBAI, Aug 11: The rupee hurtled towards the 43 mark on Tuesday after the yen touched a eight-year low of 147.60 against the dollar and a pall of gloom descended on Asian markets. The rupee closed at 42.86/88 after touching an intra-day low of 42.90, thus losing ground by nearly 1 per cent in the past three trading sessions. It lost 20 paise on Tuesday after opening at 42.66/69.
quot;Regional worries are affecting sentiment,quot; said a dealer at a foreign bank. quot;The yen is taking a beating and it looks like the region is headed for fresh trouble.quot;
The fall of the yen hit Asian stock markets also. Sensex fell by nearly 50 points to 2,970.64 as the slump in Asian currencies and stocks unnerved market players. The fall was in line with the slump in other stock markets like Japan, Hong Kong and Thailand.
The Japanese yen tumbled past 147 to a dollar and Tokyo and Hong Kong stocks plunged amid worries about a possible devaluation of the Chinese yuan, dealers said. quot;Corporates are worried over the outlook,quot; said adealer. quot;It is mainly the result of regional events8230; people are worried we are in for a fresh bout of volatility.quot;
The Indian rupee weakened further in afternoon trade as worries over regional markets weighed on sentiment, dealers said.
The spot rupee fell by nearly 20 paise on Tuesday after the yen touched a low of 147.60 against the dollar. According to dealers, there was panic buying throughout the day by corporates. quot;Importers are covering unnecessarily now. But I guess they are not quite sure about the political situation also,quot; a dealer in a private bank said.
quot;After opening at 42.69, the rupee slid and, despite SBI8217;s presence, touched an intra-day low of 42.90. The Indian currency finally closed at 42.86/88. I am not very sure whether deals were conducted at 42.90,quot; said a dealer about the day8217;s developments.
The forward rupee tracked the spot rupee on Tuesday as corporates continued to pay and there was hardly any receiving by exporters. quot;Importers are covering although we are advising themto wait,quot; a dealer in a private bank said. The one-month annualised premium closed at 6 per cent 4.6 per cent and three-month one at 7.5 per cent 6.5 per cent. The six-month annualised forward cover closed at 8.5 per cent 7.75 per cent and the one-year one at 9 per cent 8.7 per cent.
The main worry is the effect which a weaker yen will have on the Chinese currency. quot;Chinese export growth has already slowed drastically, and, if the government is forced to devalue the yuan, this will spark off yet another round of competitive devaluations,quot; said a banker.
It may be recalled that Chinese devaluation was one of the factors which was responsible for the slowdown in SE Asian exports which led to the Asian currency crisis. If China devalues, Indian exports will be badly hit, since India competes directly with China in bulk drugs, plastics and chemicals.
