 "Rupee crosses 67 mark on Fed rate hike jitters")
The rupee crossed 67 a dollar, following cues from its Asian peers, as emerging market investors braced for an imminent rate rise by the US Federal Reserve for the first time since June 2006. The US Fed is meeting on Tuesday and Wednesday to take a decision on rates and most market participants globally expect the Fed to do a ‘lift-off’.
Fitch’s arm, India Ratings & Research, said on Monday the Fed would raise its funds rate by 25 bps and the rate normalisation “would remove significant uncertainty and is likely to be positive for the Indian currency”.
“Whatever decision the Fed takes, we are prepared for any eventuality,” Rajan said after RBI’s central board’s meeting in Kolkata on December 11.
According to India Ratings, the Fed decision will bring volatility in the interim but RBI’s intervention in both forward and futures markets could smoothen the ride.
RBI had surprised the markets last week by saying it would intervene in the currency futures and options market. The currency market is a little jittery. The rupee opened at 67.04 a dollar on Monday, tracking rates at the overseas non-deliverable forward (NDF) market. The Indian currency fell to 67.1250 a dollar level in the intra-day trade and closed at 67.1050 a dollar level, the lowest since September 3, 2013.
Among major Asian currencies, the loss was led by Indonesian rupiyah, which fell 0.920 per cent against the dollar, followed by South Korean won, which dropped 0.441 per cent.
Dollar index, which measures the greenback’s strength against major global currencies, went up 0.19 per cent to 97.748.
According to currency dealers, RBI was seen in the morning for a brief period, but then it withdrew. Some exporters were seen selling dollars. RBI intervenes through public sector banks.
“The fall in the rupee was not much. The market was expecting the rupee to fall to 67.50 a dollar level before the Fed decision, but that has not happened, which means rupee has fared well. It doesn’t seem RBI has any problem with a gradual depreciation. Ten to 15 paise movement is normal in these circumstances,” said Abhishek Goenka, CEO of India Forex Advisors.
While the rupee has depreciated 60.050 per cent against the dollar in a year, the domestic currency is strong against its trade partners.
The 36-currency trade-based real effective exchange rate (REER) for the rupee was 124.69 at the end of November 2015. REER, which takes into account the rupee’s competitiveness, was 112.77 in 2013-14; 120.02 in 2014-15; and 121.25 a year ago. A figure above 100 indicates strength.
“The market is trying to realign itself before the Fed rate hike. There seems to be no other reason for the rupee to depreciate,” said Naveen Mathur, associate director (commodities and currencies), at Angel Broking.
The Indian debt and equity markets have been on a sell-off mode since November. In November, foreign portfolio investors sold, net of buying, Rs 7,629 crore in Indian equities and Rs 3,639 crore in Indian debt. In December so far, the figures have been Rs 3,265 crore and Rs 347 crore, respectively.
The yields on the 10-year bond rose 0.06 per cent to 7.784 per cent. The Sensex, the benchmark equity index of the BSE, rose 0.42 per cent, or 105.92 points, to close at 25,150.35 points.
Fitch’s arm, India Ratings & Research, said on Monday the Fed would raise its funds rate by 25 bps and the rate normalisation “would remove significant uncertainty and is likely to be positive for the Indian currency”.
“Whatever decision the Fed takes, we are prepared for any eventuality,” Rajan said after RBI’s central board’s meeting in Kolkata on December 11.
According to India Ratings, the Fed decision will bring volatility in the interim but RBI’s intervention in both forward and futures markets could smoothen the ride.
RBI had surprised the markets last week by saying it would intervene in the currency futures and options market. The currency market is a little jittery. The rupee opened at 67.04 a dollar on Monday, tracking rates at the overseas non-deliverable forward (NDF) market. The Indian currency fell to 67.1250 a dollar level in the intra-day trade and closed at 67.1050 a dollar level, the lowest since September 3, 2013.
Among major Asian currencies, the loss was led by Indonesian rupiyah, which fell 0.920 per cent against the dollar, followed by South Korean won, which dropped 0.441 per cent.
Dollar index, which measures the greenback’s strength against major global currencies, went up 0.19 per cent to 97.748.
According to currency dealers, RBI was seen in the morning for a brief period, but then it withdrew. Some exporters were seen selling dollars. RBI intervenes through public sector banks.
“The fall in the rupee was not much. The market was expecting the rupee to fall to 67.50 a dollar level before the Fed decision, but that has not happened, which means rupee has fared well. It doesn’t seem RBI has any problem with a gradual depreciation. Ten to 15 paise movement is normal in these circumstances,” said Abhishek Goenka, CEO of India Forex Advisors.
While the rupee has depreciated 60.050 per cent against the dollar in a year, the domestic currency is strong against its trade partners.
The 36-currency trade-based real effective exchange rate (REER) for the rupee was 124.69 at the end of November 2015. REER, which takes into account the rupee’s competitiveness, was 112.77 in 2013-14; 120.02 in 2014-15; and 121.25 a year ago. A figure above 100 indicates strength.
“The market is trying to realign itself before the Fed rate hike. There seems to be no other reason for the rupee to depreciate,” said Naveen Mathur, associate director (commodities and currencies), at Angel Broking.
The Indian debt and equity markets have been on a sell-off mode since November. In November, foreign portfolio investors sold, net of buying, Rs 7,629 crore in Indian equities and Rs 3,639 crore in Indian debt. In December so far, the figures have been Rs 3,265 crore and Rs 347 crore, respectively.
The yields on the 10-year bond rose 0.06 per cent to 7.784 per cent. The Sensex, the benchmark equity index of the BSE, rose 0.42 per cent, or 105.92 points, to close at 25,150.35 points.