Rupee vs Dollar: Rupee Hits All-Time Low Of 80 Against Dollar As Foreign Funds Exit

The rupee hit a historic low on the back of nearly $30 billion of foreign outflows from the nation’s equities so far this year along with concerns over a deteriorating current-account deficit

The rupee went on to hit a historic low on Tuesday to touch 80.06 per dollar on the back of nearly $30 billion of foreign outflows from the nation’s equities so far this year along with concerns over a deteriorating current-account deficit fuelled by high oil and commodity prices, reported news agency Bloomberg.

The government has tried to arrest the currency’s decline through measures including raising duties on gold imports . Other emerging market currencies are also reeling under the pressure as a hawkish Federal Reserve lures capital toward the US.

Rupee may weaken further

“The risks for the rupee remain to weaken further,” the Bloomberg report quoted Dhiraj Nim, economist and FX strategist at Australia & New Zealand Banking Group as saying. “Oil prices, especially, remain a bit volatile, while external headwinds on account of Fed tightening may continue. The trade imbalance also remains wide.”

The rupee, which witnessed 7 per cent decline this year as a shortfall in India’s current account, will probably widen to 2.9 per cent of gross domestic product in the fiscal year ending March 31, according to a Bloomberg survey in late June. The fall will be nearly double the level seen in the previous year.

The Reserve Bank of India (RBI) is for an orderly appreciation or depreciation in the currency and is intervening in all market segments to curb volatility, Governor Shaktikanta Das said earlier this month. “We don’t have a level in mind, but our endeavor is to ensure there is orderly evolution of rupee in both ways,” Das told at the Singapore Indian Chamber of Commerce and Industry’s event on Tuesday.

Nomura Holdings Inc and Morgan Stanley also remain bearish on the rupee and expect the currency to decline to 82 to a dollar by September.

The central bank also announced measures to prop up its foreign exchange reserves that have declined to the lowest in more than 14 months at $588.3 billion as of July 1.

The RBI has foreign-exchange reserves to the tune of almost $600 billion, which it has been deploying to protect the rupee. In fact duties on gold import have been raised along with petroleum exports. The central bank has also announced measures to draw more forex inflows into the country and allowed rupee settlement of trade.