 "Rupee near 21-month low ahead of US Fed meet")
Ahead of the start of the two-day meeting of the Federal Open Market Committee (FOMC), the rupee weakened to a 21-month low despite the intervention of the Reserve Bank of India (RBI). The rupee might weaken further and touch 65 to a dollar if the the US Federal Reserve sounds hawkish, said foreign exchange market dealers.
The rupee ended at 64.25, compared with its previous close of 64.17 a dollar after touching a low of 64.30. The rupee had opened at 64.08. It had touched 65.25 on September 6, 2013, when the currency was reeling under the fear of US tapering. In May 2013, Ben Bernanke, the then chairman of the US Federal Reserve, had hinted at tapering due to which the rupee had weakened significantly.
“It is possible that the rupee may even touch 65 in the future. Today the supply of dollar was very less compared to that there was a lot of demand,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.The rupee ended at 64.25, compared with its previous close of 64.17 a dollar after touching a low of 64.30. The rupee had opened at 64.08. It had touched 65.25 on September 6, 2013, when the currency was reeling under the fear of US tapering. In May 2013, Ben Bernanke, the then chairman of the US Federal Reserve, had hinted at tapering due to which the rupee had weakened significantly.
Foreign institutional investors (FIIs) have been selling domestic equities and even that is dampening sentiments for the rupee. So far this month, FIIs emerged as net sellers to the tune of Rs 3,671 crore. The situation on the debt buying front is different as FIIs bought debt worth Rs 9,384 crore on Monday and this was close to the buying last seen on August 20, 2014, worth Rs 16,072 crore.
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According to Suresh Nair, director, Admisi Forex India, even the Greece crisis is putting pressure on the rupee. Though talks with Greece’s international creditors are stuck, anger and concerns are mounting in Europe about the outcome of the crisis.
A Business Standard poll last week showed the rupee would touch 64.50 a month down the line. But Tuesday’s weakness has triggered the concern that the rupee might touch this level probably this week itself.
“The reason why the US Fed should normalise monetary policy is that they are creating a huge moral hazard on the whole assumption that the central bank will always be there to support asset prices. There are very little reasons in front of the US Fed for not being hawkish because the economic growth in US is picking up,” said Anindya Banerjee, currency analyst, Kotak Securities.
Though RBI is sitting on huge foreign exchange reserves, most of it is being saved for times when the US Fed starts with the actual rate hikes as volatility might increase more with rate hikes. The country’s foreign exchange reserves rose $239.4 million in the week ending June 5 to $352.71 billion, showed data released on Friday.