Friday, 10 August 2018

Rupee Weakens past 69 to new closing low

In the biggest fall since May 29, the rupee weakened further on Thursday, closing past 69 mark against the dollar even though foreign funds continued to flow out of emerging markets on speculations of higher U.S interest rates.
The rupee slipped 43 paise to close at 69.05 on a day when most Asian currencies enervated against the dollar. The rupee’s substantial single-day drop since May 29, with the currency touching a low of 69.07, was apparent by the non-existence of central bank interposition. The Reserve Bank India sold about $12 billion in the month of May in the spot and forward markets to moderate the pace of the rupee’s fall. The Indian currency is the worst performer in Asia in 2018, having lost over about 8%.
The previous all-time closing low was on July 5, when it ended at 68.95. The rupee had hit 69.09 intraday on June 28, its lowest ever, before recovering on suspected RBI intervention.
Reason of successive falls
Trade deficit

India’s import expenditure is rising at a time when exports expenditure contribution has hit a 14 year low. The trend of rising imports and reducing exports has further deteriorated the trade deficit.

Oil import

One of the major import commodity oil has hit quite a high price. Moreover increasing demand for fuel in domestic markets has further created a increase in expenditure on crude oil.

Outflows of capital

Foreign investment in Indian equities and bonds has slowed down which further created a dollar deficit and weakening of rupee.

- By Bhavya Bhatia

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