 "Rupee slide continues, sinks to 66.65")
The rupee, which has depreciated to levels last seen two years ago, might weaken further and breach the 67-mark soon, as dollar demand from importers with un-hedged foreign currency exposure is expected to intensify in the days to come.
On Monday, the rupee opened at 66.39 a dollar and touched an intra-day low of 66.73 a dollar, before closing at 66.65 a dollar, compared with previous close of 65.83 a dollar. The rupee’s depreciation gained momentum earlier this month, when China devalued yuan.
Monday RBI governor Raghuram Rajan assured the street that the central bank will have no hesitation in using foreign exchange reserves in a bid to reduce volatility. “We have approximately $380 billion in reserves to be used as and when the need arises. We will have no hesitation in using our reserves when appropriate to reduce volatility in the rupee,” said Rajan in his speech at FIBAC 2015.
RBI has about $ 355 billion foreign exchange reserves and another $ 25 billion in forward purchases. “These are not required until next year to meet foreign currency FCNR (Currency Non-Resident Account) liabilities,” he said. Rajan added that once market volatility settles down, India should emerge once again as an investment destination of choice.
SBI Chairman Arundhati Bhattacharya says at this point, global triggers are driven by apprehension on the way China is heading. “It will take a little time before you get to the floor. It will depend on how other central banks react to it. I feel these are triggers on apprehensions more than facts. When things are triggered by facts, they are difficult to stop but when they are due to apprehension, they will sort themselves out,” she said.
According to currency dealers today RBI had intervened in the currency market by selling dollars through state-run banks.”But the presence was not in a major way. The fall in stocks was a key factor for the weakness in the rupee. Today importers who had not covered for their foreign exchange exposures began to panic,” said Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
Experts are of the view that there is more weakening in store for the rupee and perhaps the rupee could also touch a new all-time low. The street is also awaiting for fresh cues from the US Fed as the next two-day meeting is scheduled in September 16-17.
“Now the trading range is seen at 66-69 post sharp and swift value adjustment from 63.50 to 66.50 in alignment with Emerging market currencies. The worst is not seen to behind as yet pulling all time low of 68.85 into focus. The risk is from external headwinds and fear of FII pulling out investments from Emerging markets including India, although seen as best among the worst,” said J. Moses Harding, Group CEO, liability and treasury management, Srei Infrastructure Finance.
Dollar buying by panic importers are seen continuing and currency dealers believe today the rupee could open at a level breaching the 67 mark as panic importers may continue with their dollar buying.
“The current pattern of deprecation that the global currency is following doesn’t seem to disappear soon. The rupee seems to go further down — from about 66 a dollar to 68 a dollar,” said Promoth Manghat, chief executive of UAE Exchange.
Since the beginning of this month, the rupee has weakened 3.91 per cent. Tracking the weakness in the rupee, government bonds yields rose sharply, with the yield on the 10-year bond ending at 7.89 per cent, a level last seen on June 29. This was 11 basis points higher than Friday’s close.
A few currency experts believe in early trade on Tuesday, the rupee would breach the 67-mark and head towards 67.5 a dollar.
A level of 68 a dollar is also possible in the near term.
However, there are currencies like Russian ruble, South African rand and Malaysian ringgit which has weakened more than the weakness recorded by rupee against the dollar on Monday.
On Monday, the rupee opened at 66.39 a dollar and touched an intra-day low of 66.73 a dollar, before closing at 66.65 a dollar, compared with previous close of 65.83 a dollar. The rupee’s depreciation gained momentum earlier this month, when China devalued yuan.
Monday RBI governor Raghuram Rajan assured the street that the central bank will have no hesitation in using foreign exchange reserves in a bid to reduce volatility. “We have approximately $380 billion in reserves to be used as and when the need arises. We will have no hesitation in using our reserves when appropriate to reduce volatility in the rupee,” said Rajan in his speech at FIBAC 2015.
RBI has about $ 355 billion foreign exchange reserves and another $ 25 billion in forward purchases. “These are not required until next year to meet foreign currency FCNR (Currency Non-Resident Account) liabilities,” he said. Rajan added that once market volatility settles down, India should emerge once again as an investment destination of choice.
SBI Chairman Arundhati Bhattacharya says at this point, global triggers are driven by apprehension on the way China is heading. “It will take a little time before you get to the floor. It will depend on how other central banks react to it. I feel these are triggers on apprehensions more than facts. When things are triggered by facts, they are difficult to stop but when they are due to apprehension, they will sort themselves out,” she said.
According to currency dealers today RBI had intervened in the currency market by selling dollars through state-run banks.”But the presence was not in a major way. The fall in stocks was a key factor for the weakness in the rupee. Today importers who had not covered for their foreign exchange exposures began to panic,” said Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
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Experts are of the view that there is more weakening in store for the rupee and perhaps the rupee could also touch a new all-time low. The street is also awaiting for fresh cues from the US Fed as the next two-day meeting is scheduled in September 16-17.
“Now the trading range is seen at 66-69 post sharp and swift value adjustment from 63.50 to 66.50 in alignment with Emerging market currencies. The worst is not seen to behind as yet pulling all time low of 68.85 into focus. The risk is from external headwinds and fear of FII pulling out investments from Emerging markets including India, although seen as best among the worst,” said J. Moses Harding, Group CEO, liability and treasury management, Srei Infrastructure Finance.
Dollar buying by panic importers are seen continuing and currency dealers believe today the rupee could open at a level breaching the 67 mark as panic importers may continue with their dollar buying.
“The current pattern of deprecation that the global currency is following doesn’t seem to disappear soon. The rupee seems to go further down — from about 66 a dollar to 68 a dollar,” said Promoth Manghat, chief executive of UAE Exchange.
Since the beginning of this month, the rupee has weakened 3.91 per cent. Tracking the weakness in the rupee, government bonds yields rose sharply, with the yield on the 10-year bond ending at 7.89 per cent, a level last seen on June 29. This was 11 basis points higher than Friday’s close.
A few currency experts believe in early trade on Tuesday, the rupee would breach the 67-mark and head towards 67.5 a dollar.
A level of 68 a dollar is also possible in the near term.
However, there are currencies like Russian ruble, South African rand and Malaysian ringgit which has weakened more than the weakness recorded by rupee against the dollar on Monday.