- Rupee plunges by 37 paise against US dollar on Tuesday
- Analysts see rupee declining to 73 levels against greenback going forward
- Rupee worst performing Asian currency so far this year
The rupee plunged by 37 paise against the US dollar to close at 71.58 on Tuesday. The rupee extended its fall against the American currency to a fifth day in a row. That reinforced the rupee's position as the worst performing currency in Asia so far this calendar year. While the dollar rose against a group of currencies, strong demand for the greenback from importers amid soaring crude oil prices dragged the rupee lower, say analysts.
Global crude oil prices rose past the $79 per barrel mark on Tuesday, in anticipation of lowering supply. Oil markets have tightened over the last month, pushing up Brent prices by more than 10 per cent since the middle of August.
"The rapid rise in Brent Oil of over 10 per cent within a short span from $70 levels around mid-Aug from to $78-79/barrel now due to drop in availability of supplies from Iran in the international markets... With this, not only the rupee , but also the other fragile 5 emerging market currencies viz Argentinan Peso, Brazil Real, Turkish Lira, South African Rand and Indonesian Rupiah have got impacted," said Salil Datar, CEO and executive director, Essel Forex.
Domestic petrol and diesel prices touched fresh record levels in cities in many locations, as oil marketing companies increased fuel rates for the tenth consecutive day.
"In case of the rupee, we expect it to continue to be weak as the oil prices are likely to further widen our current account deficit, leading to inflationary pressures," Mr Datar added.
The current account deficit - which implies more imports than exports - widened to $13.0 billion (1.9 per cent of GDP) in Q4 of 2017-18, according to Reserve Bank of India (RBI) data. Higher trade deficit, brought about by a larger increase in merchandise imports relative to exports, pushed the current account deficit higher. The country meets more than 80 per cent of its oil demand through imports.
Analysts see the rupee declining further to 73 levels against the greenback going forward.
"Further consistent rise in the crude oil prices and dollar index has kept sentiments bearish. There are talks of rupee moving towards 72-73 levels hence there is lot of speculative dollar buying in the market which is driving the currency lower every day," said Rushabh Maru, research analyst, Anand Rathi Shares and Stock Brokers.
Meanwhile, the stock markets extended their losses amid fund outflow-related concerns. BSE benchmark index Sensex fell 154 points to close at 38,157, while the NSE Nifty settled at 11,520.
(With agency inputs)
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