The rupee today fell sharply to hit a new low against the US dollar, amid a surge in global crude prices. The government is mulling a special NRI deposit scheme to boost dollar inflows, news agency NewsRise reported, citing an unnamed finance ministry official. The rupee hit an intra-day low of 73.42 against the US dollar, as compared to Monday’s close of 72.91. Further denting the sentiment, domestic stock markets fell sharply today, with the Sensex ending 550 points, or 1.5% lower. The rupee settled at a record closing low of 73.34 a dollar today.
A top government official had said in June that if needed the government could raise funds through foreign currency non-repatriable (FCNR) deposits, sovereign bonds or other routes to increase foreign exchange reserves.
5 things to know about the rupee fall today:
1) The price of crude oil - India’s biggest import – has inched closer to a four-year high of $85 a barrel, fuelling concerns about its impact on the domestic economy. India’s current-account deficit is estimated to widen to $75 billion in the fiscal year to March, or 2.8% of gross domestic product, according to Bank of America Merrill Lynch. That would be the highest since fiscal 2013.
2) So far this year the rupee is down about 13% against the US dollar and despite the sharp fall many analysts see rupee weakening further amid rising crude oil prices and expected rate hikes from the US Federal Reserve. Adding to the pressure on the rupee, foreign investors have pulled a net $9.1 billion from Indian stocks and bonds this year amid an emerging-market selloff.
3) The rupee today opened at a record low of 73.25 against the dollar, falling below the 73 mark for the first time, due to a sharp rise in oil prices and broader weakness in the other Asian currencies.
4) The weakness in the rupee comes despite recent measures announced by the government to control the current account deficit. Last week, the government raised import tariffs on 19 items, to narrow widening current account deficit and tackle a sharp slide in the rupee. The items included in the list include air conditioners, refrigerators, footwear, speakers, luggage and aviation turbine fuel.
5) The next domestic trigger for the rupee would be the tone of the RBI policy on Friday, says Abhishek Goenka, CEO of IFA Global. The RBI is widely expected to increase repo rate, the rate at which it lends to commercial banks, by 25 basis points to 6.75%. However, analysts would be closely watching the stance of the RBI, which the central bank had maintained as neutral despite back-to-back rate hikes in June and August.
(With Agency Inputs)