This Article is From Oct 03, 2018

Rupee Hits Lifetime Low Of 73.42 Against Dollar: 10 Things To Know

INR Vs USD: Sharp rise in global crude oil prices over the last two sessions weighed on sentiment for the local unit.

Rupee dollar exchange rate: Soaring crude oil prices along with dollar demand pulled the rupee lower

Highlights

  • Sharp rise in crude oil prices puts pressure on rupee
  • Brent crude trades near fresh 2014 highs registered recently
  • RBI to pump Rs 36,000 crore into money markets in October
The rupee registered a new all-time low against the US dollar on Wednesday, slipping below the 73 mark for the first time ever. A surge in crude oil prices - which held near their highest level since 2014 - along with demand for the dollar and strength of the greenback overseas hurt the rupee, according to analysts. Extended weakness in the rupee comes despite the Reserve Bank of India (RBI) announcing bond purchases worth Rs 36,000 this month to ease liquidity. Analysts will closely watch the outcome of a three-day policy meeting, which began on Wednesday.

Here are 10 things to know:

  1. The rupee opened at 73.26 against the greenback on Wednesday, as against its previous close of 72.91. It hit a new all-time low of 73.42 against the US currency during the session. Analysts expect the rupee to remain under pressure against the dollar amid projections of a further rise in crude oil prices.

  2. Higher crude prices would continue to weigh on domestic bonds and the rupee, said forex advisory firm IFA Global in a note. Crude prices are likely to prevail over liquidity easing measures announced by the RBI, it added.

  3. In the international market, crude prices firmed on expectations of a tighter supply from next month, but strength in the dollar and rising US production curbed gains. Brent - the global benchmark for crude oil - traded near $85 per barrel on Wednesday, inches from a 2014 high of $85.45 registered earlier this week. Brent prices have risen more than 20 per cent since the beginning of April.

  4. "Market has not reacted positively to steps taken by government for stability in rupee as they were perhaps not strong enough to address the key issue of short term demand. Market is reacting strongly to Brent crude movements and with current pace 75 can likely be seen if crude touches 88-90 levels", said Sajal Gupta, Head Forex & Rates, Edelweiss Securities Ltd.

  5. "Sharp volatility in the domestic equities and steep FIIs (foreign institutional investors) outflows from equity and debt segments are keeping sentiments bearish for the rupee," Rushabh Maru, research analyst at Anand Rathi Shares and Stock Brokers, told NDTV.

  6. Foreign institutional investors (FIIs) sold shares net worth of Rs 1,842 crore on Monday, provisional data showed.

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  7. The next domestic trigger would be the tone of the RBI policy on Friday, say analysts. Many analysts expect the central bank to increase the repo rate - the key interest rate at which the RBI lends short-term funds to commercial banks - in its upcoming bi-monthly policy statement.

  8. "Focus would now shift to the RBI monetary policy meeting. There is a buzz of repo rate hike by 25 bps and possible change in the monetary policy stance by the RBI. More importantly, its guidance will be crucial.", Mr Maru further said. "Market will also keenly watch whether the RBI announces any crucial measures to stabilize the rupee. In the near term, the rupee might trade in 72.50 and 73.80 range."

  9. The RBI had said on Monday that it would pump Rs 36,000 crore into money markets in October, pledging to buy back government bonds as part of a bid to quell fears of a credit crunch cascading through the economy.

  10. Forex markets remained closed on Tuesday on account of Gandhi Jayanti.

(With inputs from agencies)



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