- Persistent demand for the US currency led to the fall of rupee
- On Thursday, the rupee closed at a fresh lifetime low of 70.74
- RBI likely sporadically selling dollars via state-run banks, said traders
The Indian rupee collapsed to a fresh record low of 71 against the US dollar for the first time ever by slipping 26 paise today, reported news agency PTI (Press Trust of India). The fall in Indian currency is due to the persistent demand for the US currency amid rising crude prices. Weakness in almost all other Asian peers also gave a boost to the dollar today. Indian rupee was trading at 70.93/94 per dollar and skidded to 71 per dollar in opening deals before recovering slightly on the back of dollar sales by state-run banks.
.Here are key things to know:
1. According to forex dealers, besides robust month-end demand for the American currency from oil importers, dollar's strength against its rival currencies on expectations of rising interest rates amid lingering Sino-US trade tensions, weighed on the domestic currency today.
2. Growing fears about rising inflation and consistent outflow of foreign funds from the domestic equity market also impacted the domestic currency trading today.
3. "Indian rupee has depreciated around 11 per cent year to date. Higher crude oil prices, demand from defense and oil marketing firms have contributed to the latest bout of weakness. Rupee was overvalued on trade weighted real effective exchange rate. Robust FDI flows in e-commerce companies, healthy forex reserves may limit the downside of the rupee", said VK Sharma, Head Private Client Group & Capital Market Strategy, HDFC Securities.
3. Reserve Bank of India (RBI) was likely sporadically selling dollars through state-run banks to prevent a sudden sharp fall but traders do not expect any major intervention as the fall has been in line with fundamentals, said Reuters.
4. "During August, rupee has been hit by multiple factors starting with Lira depreciating, followed by US China trade talks not showing any direction. The firming up of the brent oil to $75-77 levels due to drop in supplies from Iran coupled with Venezuela has lead to the weakening of some of the emerging market currencies. For India, firming up of oil, is likely to not only widen the current account deficit further but also lead to inflation. We expect the rupee to continue to be weak despite of RBI's intervention", told Salil Datar, Executive Director & CEO, Essel Forex Limited to NDTV.
5. On Thursday, the rupee slid by 15 paise to close at 70.74 to the dollar, marking the weakest closing level for the rupee against the US currency.
6. Meanwhile, domestic market indices opened at a cautious note on Friday, ahead of the release of key GDP (Gross Domestic Product) data scheduled later in the day.
7. Globally, oil prices slipped slightly after hitting their highest levels in more than a month the previous day on growing evidence of disruptions to crude supply from Iran and Venezuela and after a fall in US inventories.
8. Asian shares came under renewed pressure today as a report US President Donald Trump was preparing to step up a trade war with Beijing sent Chinese stocks lower and partially erased gains made in this week's global rally. (With agencies inputs)