The Indian Rupee fell past the 70 per dollar mark for the first time, weighed down by an emerging market currency rout.
The rupee fell 0.2 percent to 70.08 against the dollar at 10:35 am, following a 1.6 percent drop in previous session, its worst performance since September 2013. The currency is down almost 9 percent this year, making it Asia’s worst performer.
The local currency has hit hard from a recently Turkey-led sell off in emerging assets and the trade spat between US-China. A weaker rupee could complicate the Reserve Bank of India’s task of keeping inflation in check.
The monetary policy committee led by Governor Urjit Patel increased interest rates twice since June to curb rising price pressures, while the RBI depleted $23 billion in foreign reserves to check currency volatility.
Government data on Monday showed retail inflation quickened 4.17 percent in July from a year earlier, slower than the 4.5 percent median estimate in a Bloomberg survey of economists.
The rupee can see further dip till 70.25 levels. On the other side, we could be seeing 69.60 levels if the favourable inflation data is backed by a moderation in the awaited trade deficit figuresSalil Datar, CEO, Essel Finance VKC Forex Ltd.
Bhaskar Panda, senior regional treasury advisory group at HDFC Bank doesn’t expect further rupee depreciation from current levels.
Indian macros look good fundamentally. The rupee was expected to cross 70 per dollar mark, which was an important resistance. These are good levels for exporters to hedge their position.Bhaskar Panda of HDFC Bank
However, Sajjid Chinoy, chief India economist, JPMorgan believes it may not be meaningful to have dollar-rupee target right now.
While he agrees that the rupee may depreciate further if dollar strengthens or if things get worse in Turkey, he said it may not matter too much as it would be in line with all its trading partners.
If you look at the trade weighted rate, the Indian currency has strengthened a lot between 2014 and 2018. In real terms, the rupee has appreciated almost 20 percent. In the last six months, it has only given up 6 percent of that. So we are still stronger compared with 2014 and from a competitive viewpoint, it would not necessarily be a bad thing if the rupee gradually weakens.Sajjid Chinoy, Chief India Economist, JP Morgan
Meanwhile, Abhishek Goenka, founder and CEO, India Forex Advisors expects more dollar-buying from foreign portfolio investors to hedge their rupee asset exposures. “The central bank may intervene less aggressively if the yuan continues to depreciate.”
(This story was first published on BloombergQuint)
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