The rupee (INR) today hit a record low of 69.09 against the US dollar (USD) as a combination of factors—from higher oil prices to stronger dollar to concerns over current account deficit—buffeted the currency. The previous all-time intraday low for the rupee stood at 68.86 against the dollar, which was hit on November 2016. At 4:02 pm, the rupee had pared some losses and was trading at 68.77 per US dollar. In comparison, the rupee had closed at 68.63 on Wednesday.
Here are 10 things to know about the sky-high rupee-dollar exchange rate:
1) Global crude oil prices are on a upswing, fuelling concerns over India’s current account deficit and inflation risks. “Rising crude prices are a drag on the Indian economy and fuel inflation concerns, as it is a major driver of our current account deficit. India imports around 80% of its crude oil requirements and higher crude oil prices risks widening India’s current account deficit and adding inflation risks," Religare Broking said in a note.
2) According to Nomura, every $10 rise in the oil price increases India’s current-account balance by 0.4% of gross domestic product (GDP) and pushes up inflation by 30-40 basis points.
3) Global oil prices have gained this week as the US put pressure on its allies to halt purchases of Iranian supplies.
4) Inflation concerns and a slide in the value of the rupee has also led to a selloff in domestic bond markets.
5) Overseas investors have pulled out nearly $7 billion from Indian debt and equity markets since the start of this year.
6) This comes at a time when global investors are also pulling out of emerging markets because of higher Treasury yields in US.
7) The rupee is down over 7% so far this year against the US dollar, making it the worst-performing currency in Asia.
8) Global bank Barclays Plc expects the rupee to decline to 72 per dollar by year-end as elevated oil prices hurts government finances and leads to selloff by foreign investors. Barclays’ earlier forecast was 69 per dollar.
9) DBS Bank sees rupee at 71 to a dollar by June 2019.
10) Earlier this month, the Reserve Bank of India had raised its repo rate, joining other emerging economies like Indonesia and Philippines, who have tightened to defend their currency.
(With Agency Inputs)