Economy

RBI steps in as rupee hits record low

The Indian currency which depreciated more than 7% this year, is the worst performing Asian currency so far. (Representational image)   | Photo Credit: P.V. Sivakumar

The rupee breached the 69-a-dollar mark for the first time ever in early trade on Thursday which prompted the central bank to intervene in the currency market that enabled the domestic unit to cut losses.

The rupee finally ended at 68.79 a dollar after hitting a intraday low of 69.09 a dollar. The rupee ended at 68.61 a dollar on Wednesday. Its previous record low was 68.87 reached on November 24, 2016.

“The Reserve Bank of India is said to have intervened to stop the sharp fall in the rupee against the dollar,” the treasure team at HDFC Bank said in a note.

“It is estimated to have sold dollars about $700-800 million through state-owned banks. We expect the RBI to intervene aggressively at 69.0 levels to support the rupee,” it added.

A combination of rising crude oil prices which would stroke inflation and widen the current account gap and looming trade war fears that is prompting outflows from emerging markets is putting pressure on the rupee. The Indian currency which depreciated more than 7% this year, is the worst performing Asian currency so far.

The currency will be under pressure in the near term as oil prices continue to stay high and capital outflows from the emerging markets to continue.

While the country’s $ 413 billion foreign exchange reserves acts as a cushion but it has fallen in eight of the nine weeks to June 15 as the central bank intervened in the currency market to provide support. RBI always maintains that it intervenes to cut volatility and do not target any levels.

"The outflow by foreign investors and the hardening of oil prices have impacted the rupee," said U.R. Bhat, managing director, Dalton Capital Advisors India.

"However, I feel that the rupee is fairly priced at the current levels. It has been holding steady for almost an year. Most of the other currencies have depreciated against the dollar and so the correction in the rupee is not completely negative as such," he added.

The weak sentiment spilled onto bonds and equity markets as the benchmark 10-year yield rose 6 bps to 7.94% and the the 30-share Sensex lost 179.47 points to close at 35,037.64 while the broader Nifty ended at 10,589.10, down 82.30 points.

Foreign investors have been net sellers at Rs 40,439 crore in the debt segment in the current calendar year till date. In the equity market, overseas Investors have been net sellers at Rs 5,753 crore in 2018 till date.

The market breadth was weak with more than 1,800 stocks declining as against only 765 gainers on BSE. Markets were partly under pressure due to the derivatives expiry as well with weak global cues and high crude prices acting as catalysts to dampen investor sentiment.

Meanwhile petroleum minister Dharmendra Pradhan said India cannot remain insulated in a globalised economy.

“All major players must behave responsibly. OPEC decision to increase oil production by 1 million barrels per day from July 1 will start having its impact. Weak INR and strong dollar and high crude oil prices are sentimental and have market driven impact. It impacts country like India and its a matter of concern but no commodity can remain stagnant,” he said. (End)


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Printable version | Jun 8, 2021 6:36:57 PM | https://www.thehindu.com/business/Economy/rbi-steps-in-as-rupee-hits-record-low/article24282361.ece

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