The Indian rupee recovered slightly from its lifetime low to trade at 68.95 per dollar which was declared on the Thursday morning, prior to the heavy month-end demand for the American currency from importers and banks.
As per the early trade today, the rupee fell to an all-time low tracking Asian peers, which is also indicates the weakening macro-economic fundamentals on the domestic front also weighing on the currency.
The dollar’s sharp gain overnight coupled with falls in Asian peers which was reason of the drop of the cash in early trade, traders said, this can be expected and hopeful to the central bank which can step in to stop AND prevent further losses.
The rupee’s last record low was 68.8650 per dollar, which was declared on the November 24, 2016.
though, The dollar was, a steady against its peers on Thursday, having failed to extend overnight gains in the middle of conflicting signals from Washington which was on the proposal to restrict Chinese investment as the bitter U.S.-China trade row kept financial markets on border anyway.
Regarding, domestic front, the widening current account deficit (CAD) is because of the higher global crude oil prices and steady capital outflows that have weighed on the rupee also from this 2018.
“Weakening at this pace shatters confidence. Markets expect RBI (Reserve bank of India) to manage the currency more effectively. The pressure on INR is high, thus in the absence of major action from regulators, 70 levels can be seen,” the head of currency and debt trading at a foreign bank said. “The RBI has been effectively managing (the rupee) over the years, and they do have ample firepower to manage sharp falls.”
Foreign exchange reserves are stand at $410.07 billion as of the 15th June, latest RBI data showed.
Oil prices have been rallying for much from this 2018, which is also tightening market conditions because of the record demand and voluntary supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
Economy’s March quarter CAD broadens to $13.0 billion, or 1.9 per cent of GDP, from $2.6 billion, or 0.4 per cent of GDP, from a year earlier.
In spite the rise in CAD, it remainder and remain modest relative to GDP which is basically financed by equity inflows, that is consists of the foreign direct investment (FDI), Moody’s said in a note on the Thursday, which also add the large foreign exchange reserves provided a good buffer.
“India’s low dependence on foreign-currency borrowing to fund its debt burden limits the risk of currency depreciation transmitting into materially weaker debt affordability,” Moody’s added.
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