The currency has lost 4.8 per cent against the dollar in the last four weeks.
The rupee on Tuesday breached the 53-per dollar mark, with investors continuing to shift their preference towards the dollar, as the country heads for an economic slowdown.
The rupee on Tuesday ended at 53.23 against the dollar, down 0.7 per cent from Monday's close of 52.84, after touching a record low of 53.52. The currency has lost 4.8 per cent against the dollar in the last four weeks and 16 per cent so far this year.
According to dealers, the rupee is likely to remain under pressure, as not much intervention is expected from the Reserve Bank of India (RBI). According to RBI data, it sold only $1.7 billion in September and October. The country's foreign exchange reserves, on the other hand, have declined by $16 billion since September. “Any RBI intervention is likely to be a token gesture,” said a foreign exchange dealer with a private-sector bank. “The one factor that could help the rupee to some extent is growth-supporting steps from RBI, like a cut in the cash reserve ratio.”
Economists expect some measures from the central bank to stem the rupee depreciation.
“There are various things that can be done. RBI can contemplate doing away with the cancellations and rebooking of forward contracts, supplying directly to the oil companies…. With the rupee falling below the 53-per-dollar mark they (RBI) would tend to get a little jittery and perhaps step in. So, at 53.4 per dollar and 53.5 levels, there could be some resistance,” said Abheek Barua, chief economist, HDFC Bank.
Bankers expect some resistance at 53.5 levels. “The rupee should not fall below 53.5 per dollar levels from here on. These are good levels for exporters and traders to sell dollars. But the way the rupee has fallen in the last couple of trading sessions, one cannot really tell whether these would come in,” said Sudarshan Bhat, chief forex dealer, Corporation Bank.
The continuous decline of the rupee against the dollar has also made many companies worried, and these are now thinking of hedging for one or two years. “This is something no one expected, and there is no way this can be hedged. Six months back, no one had predicted this level for the rupee. What can be done now is to go ahead and hedge for the next one or two years,” said A Subba Rao, chief financial officer, GMR Infra. “GMR has dollar loans of around $350 million for the Delhi airport and $115 million for the Hyderabad airport. But we have revenues that come in dollars at both these airports…To a great extent, we are already covered. There may be a 10-15 per cent shortfall, which would be taken into the profit-and-loss account,” Subba Rao said.
Debashis Poddar, chief executive, Bombay Dyeing, said, “The rupee’s fall is good news for textile exporters, but this benefit would only remain with the current contracts. Forward contracts would remain a challenge, as the customer will try to negotiate.”
The depreciating rupee has made crude oil purchases dearer for oil marketing companies, despite a $4 drop in Brent prices over the last month. This may push oil subsidies higher, said a Mumbai-based analyst.
