The rupee closed below 57 a dollar on Friday, hitting a new low for the second consecutive trading day. It closed at 57.14/15 a dollar against 56.30/31 on Thursday. It hit a record intra-day low of 57.32.
Even though dealers said that the Reserve Bank of India (RBI) intervened in the rupee market by pumping dollar on the second day, the demand for dollar pushed the rupee down to lower levels, especially from oil companies. While this precipitated the fall, speculators tested rupee at lower levels. “Indian rupee touched a record low of 57.32 against the U.S. dollar, a fall of more than a rupee since yesterday [Thursday],” said Anindya Banerjee, Senior Manager, Currency Derivatives Research Desk, Kotak Securities.
Lack of monetary easing by the U.S. Federal Reserve has triggered a run for the U.S. dollar and selling in equities and commodities globally. The just-concluded French and Greek elections did offer a brief respite to the dollar but lack of policy action from central banks helped it recover.
According to Mr. Banerjee, markets would keep a close eye on the next week’s European Union summit.
“EU summit is expected to discuss measures on combating the crises, in case concrete measures are not announced, then it can cause further sell-off in risk assets and rally in the U.S. dollar.”
“Primary force firing the fall is lack of initiative on the part of the Government / RBI to stimulate growth. The other reason, obviously, is scramble on the part of the oil companies to buy cheap oil, taking advantage of fall in prices of Brent crude,” said Sudip Bandyopadhyay, Managing Director and CEO, Destimoney, a financial services firm.