The rupee depreciated further on Monday to cross 75 against the dollar mark, spooked by the likely adverse impact of the second wave of Covid-19 pandemic on economic recovery and unfavourable effects of surplus liquidity in the financial system.
The currency unit opened at 74.97 to the dollar, about 24 paise weaker against the previous close. The rupee crossed the 75 mark for the first time in about nine months, depreciating to a low of 75.145. Intra-day, it also tested a high of 74.78. It closed weaker at 75.055 to the dollar, down about 33 paise over the previous close of 74.73.
CARE Ratings, in a report, observed that the Reserve Bank of India’s policy of providing even more liquidity to the system through the Government Securities Acquisition Plan, though positive for the bond market (where yields have softened by 5-8 basis poinys), is not so for the currency.
“There is now excess liquidity of ₹7-lakh crore in the reverse repo basket and there will be an infusion of ₹25,000 crore on the 15th of this month. So much liquidity in the system is not good news for the rupee...,” CARE said.