Rupee breaches 68/$ level again

The domestic currency Rupee on Tuesday again took a back seat against the US dollar, after breaching the 68.00 levels in intraday, it closed the session at 67.63 levels.

The rupee was impacted by gains in the dollar on international markets and falling domestic shares as equities weakened and investors were uncertain on the government acting decisively to restore confidence in the economy.

As crude oil prices rising due to fears of a potential US military strike on Syria, economists have called for an hike in subsidised fuel prices to help address concerns over a record high current account deficit and a fiscal deficit that is among the highest of all the major emerging market economies.

Also, markets are keenly waiting to see how former International Monetary Fund economist Raghuram Rajan will handle the defence of the rupee once he takes over as governor of the Reserve Bank of India on Thursday, having previously been an advisor to the finance ministry.

Kotak Securities' currency analyst Anindya Banerjee said: “....A combination of sell-off in leading emerging market currencies and fresh jitters in the Middle East has driven Rupee lower. Indian equity market suffered a steep sell-off, with leading indices dropping close to 4 per cent....Over the near-term, fears of Fed tapering and tensions in Middle East could Rupee under pressure, with risk emerging for a sell-off beyond 69.00 levels on spot.”

During the day, the dollar-rupee pair made a high of 68.25 levels and a low of 66.25 levels. Since the start of the trading session the rupee was seen depreciating reversing the modest sentiment to negative again.

‘Adjustment in Re was called for’

New Delhi, Reuters: Adjustment in the rupee, which has fallen by nearly 20 per cent since May, was called as the country has seen high inflation compared with other countries, Prime Minister's economic adviser C Rangarajan said on Tuesday.

"In some sense, the adjustment in the rupee was very much called for because our inflation rate was running so much higher than in the other countries," said Rangarajan, chairman of Prime Minister's Economic Advisory Council.

On Tuesday, the partially convertible rupee, the worst performing currency among the major global economies, dropped as much as 3.1 per cent to 68.12 per dollar.