Rupee hits all time closing low

The rupee on Monday closed at an all time low of 74.07 against US dollar, slumping 30 paise, owing to the unabated foreign fund outflow.

It is for the first time that rupee has closed below the 74 mark against the US currency, although the rupee last week had touched the lowest level of 74.22 during the intraday trade.

The rupee opened lower by 14 paisa against Friday's close of 73.76 in early trade as the US dollar strengthened against major global currencies weighed on the rupee sentiment.

At the Interbank Foreign Exchange (Forex) market, the domestic currency opened lower at 73.89 a dollar against its previous closing of 73.75.

It recovered to a high of 73.76, but failed to sustain the momentum and plunged to 74.10 and finally closed at 74.07, down by 30 paise. It is the fifth straight session of decline of the rupee.

On Friday, the domestic curerncy plummeted by 18 paise to end at 73.76.

The pressure on the rupee mainly came from the continued outflow of foreign institutional investors and foreign portfolio investors from the Indian markets. The FIIs and FPIs withdrew Rs 1,805.07 crore from Indian markets on Monday. Till now, in 2018, FIIs and FPIs have withdrawn a whopping Rs 75,276 from India's debt and equity markets. In five trading sessions of October alone, the FIIs and FPIs have withdrawn Rs 13,779 crore from debt and equity markets.

The higher returns in US stock markets and interest rate differential has mostly lead to the FII and FPI outflow from the country. That is why most analysts had expected RBI to hike repo rates, after US Federal Reserve hiked Fed Fund Rates from 2.0% to 2.25%.

In fact, nine out of 49 participants in the Bloomberg poll had predicted no change, which seemed to be impacted by domestic liquidity concerns rather than currency weakness, even as a depreciating rupee remains a constant threat to the RBI’s inflation target.

However, RBI surprised everyone by holding on to the repo rate at 6.5% by a 5:1 vote by the six-member monetary policy committee.

Infact, analysts suggest that RBI has left the job of plugging free fall of the rupee to the government and expect rupee to fall below 75 mark by the year end.

"By keeping the policy on hold, it seems the central bank of India has dumped the rupee, which leaves the ball in the government’s court for more substantial currency stabilisation measures. We just revised our year-end USD/INR forecast to 75.0 from 73.5, though now it seems, maybe it wasn't enough," Dutch multinational banking and financial services corporation ING said in a research note.

Meanwhile, after a witnessing the worst fall of 2018 last week, markets ended in green on Monday. After a volatile day of trading, 50-share BSE Sensex ended 97 points higher on 34,474. On the other hand broader index, 50-share NSE Nifty, ended 32 points higher on 10,348.