By BS Reporter
The rupee plunged the most in nine months to breach the 57-a-dollar mark on concerns that a slow rate of economic growth would reduce capital inflows. The currency was also hurt by demand for dollar from oil firms and gold importers.
Traders said the weak sentiment following adverse remarks by rating agencies over India’s worsening fundamentals prompted investors to move towards safer currencies.
Many in corporate India feel the worst is yet to come. JSW Steel Joint MD & Group CFO Seshagiri Rao said importers were now looking to cover for the next six months and beyond, as the perception was that the rupee would touch 63.
Some market players are baffled by the rupee’s movement. While some said the rupee could continue to fall further in the near term (the 12-month onshore currency forwards were at 60.10 per dollar while the three-month onshore currency forwards traded at 58.14 a dollar), others said the rupee was now being driven more by negative sentiments than fundamental weakness.
HDFC Bank Chief Economist Abheek Barua said: “The currency is grossly oversold at these levels and, technically, there should be a pullback or some stability between 56.50 and 57.50.” He added positive factors like fall in oil prices and moderating gold imports were not getting reflected in the exchange rate of the Indian currency.
Traders said the Reserve Bank of India (RBI)’s measure of allowing oil companies to source dollars from nationalised banks might not work if dollar flows remained thin.
The rupee on Friday opened with a gap of 50 paise over yesterday’s close, as disappointing data from the Chinese and Euro zone manufacturing PMI and a rise in the US jobless claims triggered a fresh wave of risk aversion overnight. The dollar index, which measures the safe-haven currency against six other major currencies, rose to 82.46 on Friday from 82.29 yesterday.
Mild interventions from RBI were unable to stop the rupee from falling to its life-time low of 57.33 against the dollar on Friday, before pulling back marginally to close at 57.16 — a fall of 1.5 per cent over the previous close. This is the biggest intra-day fall the rupee has seen since December 2011. Over the week, the rupee fell by three per cent — the highest weekly loss since September 2011.