As Turkish currency lira plunged into deeper crisis due to harsh US sanctions, the contagion spread to broader emerging markets currencies, including rupee which tanked to a lifetime low of 69.93 against the dollar. The local currency lost a whopping 110 paise in a single day on Monday. This is the biggest single day fall for the rupee in the past five years. Previously, the rupee had dropped 2.4 per cent or 148 paise in a single day in August 2013. Worse, experts expect the rupee to open below the psychological 70-mark on Tuesday and fall further to 71 levels in a week’s time.

Traders dealing in foreign exchange said the Reserve Bank didn’t intervene aggressively as the rupee opened weak and continued to log losses during the day.
A fall in the rupee slows economic growth and impacts corporate earnings and causes market volatility. A weaker currency also hits the common man hard, impacting not just his grocery bill but also his planned vacation abroad or studies in a foreign country besides hurting his investments.

However, a depreciating rupee is good for exporting sectors and helps in job creation.

People who will bear the major brunt of currency devaluation are foreign travellers, students studying abroad and Indian patients taking treatment/ health services from foreign hospitals.

The local currency opened at a record low of 69.47 against the dollar tracking weakness in other emerging market currencies on concerns of a spill over from the Turkish crisis. The lira has fallen about 45 per cent against the US dollar so far this year on worries over Turkish president Tayyip Erdogan’s increasing control of the economy and a deepening diplomatic rift with the US.

On Friday, the US increased tariffs on steel and aluminium imports from Turkey to 25 per cent and 50 per cent.

Experts feared the possibility of a deeper contagion as European banks have $140 billion exposure to Turkish assets.

Anindya Banerjee, currency analyst at Kotak Securities, said, “The weakness in the rupee is driven by Turkish lira and the Russian rouble following fresh US sanctions on them. In addition a lot of stop losses got triggered as people short of dollars had to cover their exposure. This can continue if the tensions between Turkey, Russia and the United States continue.”

“The rupee can fall to 71 against the dollar by next week,” added Banerjee.