Rupee slides 26p to close below historic 70-mark

The rupee on Thursday slid 26 paise to close below the 70-mark for the first time against the US currency, hammered by strong dollar demand amid growing concerns over widening trade deficit.

The Indian currency collapsed to a historic intra-day trading low of 70.40 before closing at fresh life-time low of 70.15 per dollar, down by 26 paise or 0.37% over the previous close.

The RBI intervened in the currency market to save the beleaguered currency, currency traders said.

Emerging market currencies and stocks remained in the investors’ cross hairs as worries mounted despite fresh rally for the Turkish lira.

The lira continued to rebound from record losses a day after Qatar pledged $15 billion in investments to help the Turkey’s economy.

Headwinds in the form of widening trade deficit due to surging crude prices amid unsupportive global factors kept forex sentiment shaky and largely weighed on the local unit. Country’s trade deficit soared to a near five-year high of $18 billion, data released by the commerce ministry on Tuesday showed.

A massive exodus of capital outflows from both equity and debt market against the backdrop of US Federal Reserve’s anticipated interest rate policy is triggering wide panic, a forex dealer said.

High current account and fiscal deficits mean the central bank may have little room to tap into its reserves to defend the currency, the dealer said.

The Indian currency has lost 10.5% of its value this year so far against the backdrop of India’s ballooning fiscal deficit and surging crude prices and mounting worries surrounding the US-China trade conflicts.

Allaying worries over the rupee’s slide, Niti Aayog vice-chairman Rajiv Kumar said that the currency was coming back to its natural value after witnessing a 17% appreciation in the last three years.

The rupee should be valued realistically and not be overvalued, he commented.

Meanwhile, officials said that India’s crude oil import bill is likely to jump by about $26 billion in 2018-19 due to the rupee’s fall, which could fan inflation worries.

While exporters are seeing short-term gains in the rupee’s slide, they were worried that the currency going above 71-mark would stoke inflation and may also prompt foreign buyers to seek discounts.

The rupee has been one of the worst performing currencies among peers this year - raising fears of a repeat of the currency crisis of 2013.