Indian Rupee creates wrong kind of history, plunges at warp speed to lowest ever

The rupee on Thursday slipped below 72-mark against the US dollar for the first time, hitting a record low of 72.10 amid sustained foreign fund outflows and widening current account deficit. It just took the unit less than a week to hit the milestone from 71 a dollar last Friday. It, however, recovered to close at 71.99 a dollar, down 0.32% from its previous close of 71.76.

This is its worst declining streak since April with the local currency falling for the seventh consecutive day.

According to an outlook by Religare Broking Ltd, the fall is amid the greenback purchases by state-run and foreign banks.

Kotak Economic Research in a recent note said fragile global risk sentiments and increasing domestic vulnerabilities have continued to weigh on rupee in the calender year 2018.

"Recent EM (emerging market) meltdown has further highlighted the vulnerability of economies with high external indebtedness. Intensifying EM crisis, fear of a contagion and broad-based USD strength coupled with the deteriorating domestic macro scenario and domestic political uncertainty are expected to keep the INR under pressure," the note said.

The brokerage house expects the rupee to now range 69-74 (earlier 67.5-71.0) for the rest of the fiscal 2019 and does not rule out announcements of exceptional measures soon.

According to Religare outlook, the US trade deficit widened in July by the most in the three years, and the gap with China hit a record as the Trump administration imposed tariffs on a range of Chinese goods, prompting retaliatory levies from Beijing.

The gap increased 9.5% to $50.1 billion, biggest since February, from a revised $45.7 billion in the prior month.

On Wednesday, finance minister Arun Jaitley said, "There are virtually no domestic reasons attributable to it (the weakening of the rupee). The reasons are global. We must bear in mind that in the last few months, the dollar has strengthened against almost every currency."

So far this year, the rupee has weakened 11.4%, while the foreign investors have sold $261.20 million and $6 billion in equity and debt markets, respectively.

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The stock market, meanwhile, discounted the rupee fall as Sensex rose 224.50 points on Thursday to close at 38,242.81, while Nifty closed 59.95 points higher at 11,536.90.

In a research note, IFA Global Research Academy, said, "10 G-Sec yield in India has been inching up on fear of more rate hike coming from RBI and in September till date we have seen around Rs 2,700 crore of outflow related to debt from the Indian market. The market is speculating open market operations (OMO) announcement by RBI to ease the rise in yield." The report said that oil prices fell on concerns related to tariff deadline of further $200 billion on China and also because of threat related to tropical cyclone eased.

DROP ZONE
23 paise Rupee fell on Thursday
8.06 Benchmark yields hit multi-year high
$77.46 Brent averaged in early Asian trade

Source: DNA Money