NEW DELHI, Jun 8 (Agencies): Indian currency rupee on Tuesday hit a fresh all-time low of 78.59 per US dollar, primarily due to a sell-off in equities, rising inflationary pressures, and elevated global crude oil prices.
International crude oil prices have been above the psychologically crucial $100 per barrel mark since February, and inflation is at a multi-decadal high in advanced countries.
Inflation in India, too, is above the permissible tolerance band at the moment. “Indian Rupee spot notched a fresh record low of 78.5963 against dollar index on June 28, owing to continued sell-off in equity markets coupled with elevated crude oil prices, which might weigh down on the net importer’s fiscal balance,” said Jigar Trivedi – Research Analyst- Commodities & Currencies Fundamental, Anand Rathi Shares and Stock Brokers.
Rising crude oil prices once again bring back concerns on the inflation front, which might prompt the central banks to be very aggressive in hiking rates and thereby inducing a recession, said Trivedi.
“Going forward, we expect the rupee spot to depreciate towards 80/81 levels by the year-end as twin deficits (fiscal deficit and current account deficit) add to pressure on the emerging market currency,” added Trivedi.
Back home in India, foreign portfolio investors pulling out funds from the country for past consecutive eighth-to-nine months are also likely to have put pressure on the domestic currency, analysts had said.
Typically, the Reserve Bank of India intervenes in the market through liquidity management, including the selling of dollars, with a view to preventing a steep depreciation in the rupee.
India’s foreign exchange (forex) reserves slumped by $5.87 billion to $590.588 billion for the week that ended on June 17.
The country’s forex reserves had dropped for the third consecutive week. It has slumped by $10.785 billion in the past three weeks under review.