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Business News/ Market / Stock-market-news/  Rupee recovers from all-time low of 70.08 a dollar
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Rupee recovers from all-time low of 70.08 a dollar

The rupee opened at 69.84 and hit a record low of 70.08 a dollar, following a 1.6% drop in the previous session. It closed higher at 69.89.

So far this year, the rupee has weakened nearly 9%. Photo: MintPremium
So far this year, the rupee has weakened nearly 9%. Photo: Mint

Mumbai: Indian rupee on Tuesday crossed the psychological 70-mark against US dollar for the first time as Turkey-led rout in emerging-market currencies intensified. The rupee reversed losses to close at 69.89 a dollar, up 0.05% from its previous close of 68.93. The home currency opened at 69.84 and hit a record low of 70.08 a dollar, following a 1.6% drop in the previous session. The currency is down nearly 8.7% so far this year, worst performer in Asia.

The 10-year bond yield closed at 7.818%, from its previous close of 7.823%. Bond yields and prices move in opposite directions.

“Emerging markets were shaken by the huge depreciation in the Turkish Lira and the jitters were felt across asset classes particularly the currency. Bond markets, taking cues from the depreciating Rupee, weakened significantly", said Edelweiss Finance in a note to its investors.

The government blamed external factors for the rupee’s fall to beyond 70 against the US dollar, reported PTI. Economic affairs secretary Subhash Chander Garg said the “rupee is depreciating due to external factors" and there is “nothing at this stage to worry". Garg said that he would not worry even if rupee fell to 80, provided other currencies weaken as well.

Indian currency is already under pressure due to higher crude oil prices and US-China trade war escalation and further weakness can complicate the Reserve Bank of India’s job to keep inflation in check, analyst says, just after recent data showed that retail inflation has slowed. RBI has raised interest rates twice this year and used nearly $23 billion foreign reserve to check currency volatility.

“Sharp drop in domestic currency complicates the RBI’s job of keeping inflation in check as India imports oil and even if oil prices stay at current level, it will cost more to buy it. Moreover, this is more worrisome for corporates that have foreign currency borrowings," said Soumyajit Niyogi, associate director, India Ratings and Research.

Retail inflation dropped to a nine-month low of 4.17% in July, from 4.92% a month ago on the back of softening food prices and a favourable base. Core inflation eased to 6.1% from 6.4% a month ago.

Analyst believes that factors such as broader emerging market currency movement, dollar strength, and the trend in crude oil prices will continue to drive the outlook for the rupee in the immediate term.

Moses Harding John, chief executive officer for India & East Africa at SBM Holdings, expects rupee to remain in the range of 68.5-72 for rest this year, significantly down from earlier estimate of 63.5-68.50 against the dollar.

Benchmark Sensex Index rose 0.55% or 207.10 points to 37,852. Since January, it has gained 11.2%.

With Agency Inputs

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Published: 14 Aug 2018, 09:21 AM IST
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