Mumbai : The Indian rupee on Tuesday hit the 70-per dollar mark for the first time, tumbling to a record low, as a Turkey-led rout in emerging-market currencies intensified losses.
The rupee slipped as much as 0.2 per cent to 70.08 per dollar in Mumbai and is down almost 9 per cent this year in Asia’s worst performance.
The government attributed the fall in the currency value to external factors. Economic Affairs Secretary Subhash Chandra Garg said that there is nothing to worry about as long as the depreciation is in line with other currencies.
India’s currency has been among the hardest hit in Asia from the recent Turkey-led sell-off in emerging assets, thanks to a wide current-account deficit that’s already strained by higher oil prices. A weaker rupee could complicate the RBI’s job of keeping inflation in check.
The local currency crashed below the 70-mark in early trade to touch all-time low of 70.10 a day after bloodletting in global markets due to worries over Turkish economic crisis and a sharp plunge in the lira.
A rebound in oil prices, FII outflows and concerns over currrent account deficit weighed on the domestic currency, pushing it to fresh life-time lows. Heavy intervention by the RBI predominantly resisted the rupee’s sharp depreciation and staged a spirited recovery from its life-time low, a currency trader said.
“Rupee is depreciating due to external factors…nothing at this stage to worry,” Garg said adding external factors may ease going forward. He said that even if the rupee falls to 80 per dollar, “it will not be a concern provided all other currencies depreciate in the same range”.
The Indian currency, he said, is still better as compared to certain other currencies. In the current financial year, which began on April 1, the rupee has depreciated around 6.7 per cent against the US dollar. Garg also said that while the Reserve Bank of India had sufficient foreign exchange reserves, its intervention in the currency market may not be of much help as of now, as the weakness in the rupee was a result of global factors. RBI’s foreign exchange reserves were at $402.70 billion in the week ended August 3, down $1.49 billion over the preceding week, latest data released by the central bank showed.
RBI’s stated position is that it does not seek to target a particular level for the rupee’s exchange rate against the dollar, and uses its reserves to ease volatility in the currency market. SBI Chairman Rajnish Kumar said all currencies have weakened against the dollar, but the Indian currency has not weakened very much in comparison to other currencies.
“I feel that it (rupee) should stabilise between 69 and 70 because if you look at the numbers for investment which is coming into the country — investment in bonds, investment in equities — this level has become attractive for foreign investment,” Kumar said.
B Prasanna of ICICI Bank said the rupee is the victim of a contagion effect impacting all Emerging Markets (EMs) triggered by the Turkish crisis. “The gradual pace of depreciation witnessed till the 69 figure levels are a result of the Yuan depreciation and the current account deficit worsening sharply from 0.6 per cent of GDP in FY’17 to an expected deficit close to 2.5 per cent of GDP this year, stemming from surging oil prices and worsening of the already negative basic Balance of Payment (BoP),” he said.