Battered Re keels below 60 mark

RBI rescue plan crumbles

Battered Re keels below 60 mark

The rupee has breached the key psychological level of 60.00 against the US dollar and closed the session at 60.71 on Wednesday, thereby reinforcing the vulnerability of a country with limited resources and battling to check a record-high current account deficit.

Notwithstanding a feeble attempt by the Reserve Bank of India (RBI) to defend the currency, the latter’s fall in the afternoon session was swift owing to dollar demand from importers triggered stop losses at about  the level of 60 against the dollar. So the dollar-rupee pair was seen making a high of 60.75 levels and a low of 59.72 levels.

The only consolation is that the rupee fall was not an out of the box-phenomenon, as all the major Asian currencies are seen depreciating against the dollar. In fact, the rupee has witnessed sharp depreciation in the last two-months and it has fallen 11 per cent from May and over 5 percent in June itself, especially after the Federal Reserve’s announcement last week.  That apart, huge outflows from the debt markets have ave put further pressure on the rupee.

So much so, that the equity markets could not hold its initial gains this day and closed the session in the red, with the premium indices like BSE Sensex lost 77 points to close at 18,552 points and the 50-unit Nifty at NSE shedding 20 points to settle at 5,588 points. 

Also, the equity market is joining the sell-off in the debt markets and the banking stocks   amongst others faced a hit after the rupee breached its crucial 60 levels against the dollar,  Now the worry for investors is the “no action policy” by the RBI which left the former clueless about the rupee trend. 

The situation is further compounded by perceptions gaining fancy that India is unable to defend its currency in the short-term as the central bank is having about $291 billion in currency reserves which is enough to cover seven months of import needs of the country.

India Forex Advisors CEO Abhishek Goenka said, “We saw the rupee weakening at a faster pace this week against the US dollar, which has depreciated by almost 7 percent in the current month majorly attributed to huge outflows from the debt market.  Apart from being quite vulnerable to the global factors, the strong gains in the US Dollar and sharp weakness in the Euro is also contributing to the huge losses in the Rupee. Going ahead, if it sustains above 60 levels on a closing basis then there is a possibility that it might hit the next technical key level of 61.”

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