BackRupee slides further, hits record low beyond 79 vs US dollar
Rupee dollar rate today: Many analysts see the Indian currency dropping to 81 levels by the year-end
PremiumThe rupee today hit a record low of 79.11 vs US dollar against previous close of 78.97 as persistent foreign funds outflows weighed on investor sentiments. The US dollar has appreciated over 6% against the US dollar so far this year. Broad strength in US dollar also weighed on the rupee. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher at 104.90.
“Shortage in cash dollars and collapse in 1-year forward premiums have weighed down on rupee. Going forward, we might see the Rupee spot depreciating towards 80.5/81 levels by the year-end, owing to the widening of twin deficits. Rising crude oil prices might continue to weigh down on the net importer’s trade deficit, after rising to a record high deficit of $24.29 billion in May," said Jigar Trivedi - Research Analyst- Commodities & Currencies Fundamental, Anand Rathi Shares & Stock Brokers.
“Meanwhile, narrowing interest rate differentials amid hawkish central banks across the horizon with Fed ready to hike 75 bps in July might amplify the capital outflows, adding pressure on capital account. Though RBI might intervene in the forex markets to curb the losses, it's unlikely to draw a line in the sand, as fundamentals remain weak," he added.
Global oil benchmark Brent crude futures were higher near $110 per barrel. On the domestic equity market front, the 30-share Sensex was trading 500 points lower. Foreign institutional investors were net sellers in the capital market on Thursday as they offloaded shares worth ₹1,138.05 crore, as per stock exchange data.
To check the rupee drop, the government has tightened exports of oil and imports of gold. The administration raised import taxes on gold, while increasing levies on exports of petrol and diesel as it sought to control a fast-widening currency deficit. The measures sent Reliance Industries Ltd shares crashing over 5% today.
The Reserve Bank of India has been battling to slow the currency’s decline, and runway rupee depreciation will worsen price pressures, and may spur more rate hikes that weigh on growth.
The government on Friday raised the import duty on gold to 12.5% from 7.5%, according to a notice dated June 30, reversing a cut last year.
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