Why the rupee has hit an 8-month low

23 May 2013, 01:01 PM IST

Global dollar strength: Overnight, U.S. Federal Reserve Chairman Ben Bernanke said a decision to scale back the Fed's massive bond-buying programme could be taken at one of the central bank's "next few meetings". Bernanke's comments lifted the dollar to a three-year high versus a basket of currencies.
China weakness: Most emerging Asian currencies on Thursday fell as a weak China manufacturing survey increased concerns over the world's No.2 economy, adding to pressure on regional units generated by prospects of reduced inflows if the Federal Reserve scales back its stimulus.
Technical weakness: A breach of key support levels seems to have opened up more downside for the rupee. "The breach of 55.20 has slightly changed the outlook on the rupee," said Hari Chandramgethen, head of forex trading at South Indian Bank. India Forex Advisors, in a note, said the breach of 55.40 if sustained may see the rupee falling to record low levels.
Current account deficit: Concerns about India's high current account deficit have revived after data earlier this month showed a spike in the April trade deficit. Continued demand for the greenback from oil importers, particularly a large private refiner, weighed on the rupee on Wednesday, dealers said.
Weak equity markets: The Sensex has fallen nearly 300 points on Thursday, extending its decline to the fourth straight day. The Nifty has slipped below the key 6,000 levels weighing down on the currency.

(With inputs from Reuters)