Rupee slumps to all-time low

Share

The Indian rupee tumbled to its all-time low of 69.09 at the opening trade today.

The rupee's last record low was 68.87 per dollar, hit on November 24, 2016.

Unfortunately, that is not the case, as foreign investment in the Indian bond and the rupee markets has slowed down.

India is the third largest consumer of oil and the rise in prices has clearly taken a toll on the market.

India must decrease dependence on Iranian oil imports, USA envoy to the United Nations Nikki Haley said in New Delhi on Wednesday after meeting Indian Prime Minister Narendra Modi.

Oil prices have been rallying for much of 2018 and Brent crude futures, the global benchmark for oil prices, were hovering around $77 per barrel as of 0647 GMT.

While most currencies have been losing ground against the dollar, the rupee's 8% slide in 2018 makes it Asia's worst-performing currency.

D K Srivastava, chief policy advisor, EY India, sees current account deficit (CAD) widening further if the trend of free fall in the rupee value continued.

More news: How will Deschamps stop Messi?
More news: ‘Overwatch’ Reveals New Hero Wrecking Ball, a Genetically Modified Hamster
More news: Colbert, Fallon And Conan Team Up To Respond To Trump’s Criticism

That the RBI is increasingly concerned about these outflows can be gauged from governor Urjit Patel writing an op-ed in the Financial Times warning of drying dollar funding for emerging markets putting a "sudden stop" to the global economic recovery.

During 2017-18, the exports grew by about 10 per cent to United States dollars 303 billion.

Oil has gained this week as the U.S. puts pressure on its allies to halt purchases of Iranian supplies.

Moody's Investors Service said India's large and relatively stable domestic financing base limits its external vulnerability, contributing to "the economy's resilience by sheltering it from abrupt changes in external financing conditions". In the run-up to 2014 elections, Modi had asked whose age the fall in the rupee reflected - the prime minister or the finance minister.

Consistent dollar demand from banks and importers, mainly oil refiners, following higher crude oil prices kept the rupee under pressure.

The latest selloff coincided with a spike in crude oil prices.

"Although not obvious, the RBI seems to be instrumental in rescuing (the) rupee from its low of 69.10 to current prices", said Pritam Kumar Patnaik, Business Head at Reliance Commodities. Foreign portfolio investors have pulled out more than Rs 46,600 crore from the capital markets (equity and debt) in the year so far.

Share