Rupee Closes Below 74-Mark Against Dollar For First Time Ever: 10 Points
- Monday's all-time closing low marked the first time the rupee ended below the 74 mark against the American currency. Advances in the dollar overseas along with foreign fund outflows dragged the rupee lower, according to analysts.
- A fall in global equities boosted demand for the dollar as investors rushed for safety. The dollar rose 0.3 per cent against a basket of major currencies, edging towards a 14-month high hit in mid-August.
- The advances in the greenback came after China's central bank eased its domestic policy to support the economy, marking the latest development in the deepening trade war between Beijing and Washington. Growth concerns led the People's Bank of China (PBOC) on Sunday to cut the level of cash that banks must hold as reserves.
- Analysts say that the surprise move by RBI, indicating that the central bank is comfortable with the rupee weakness, has spooked the forex markets.
- "The uncertainty around rupee could shy away FPIs (foreign portfolio investors) from domestic stocks and bonds as a hold sends signals that the RBI is comfortable with rupee depreciation," forex advisory firm IFA Global said in a note.
- Credit ratings agency CARE Ratings said that it expects the rupee to trade between 71 and 75 at least for five months. "With OPEC (Organization of the Petroleum Exporting Countries) ruling out increase in crude oil production and supply concerns ahead of the US sanctions on Iran, prices will continue to move in upward direction.... We are expecting the rupee to vary between Rs. 71-75 up to March'19 depending on when the oil prices retreat ."
- Foreign investors pulled out over Rs 9,300 crore ($1.3 billion) from the capital markets in the past four sessions.
- RBI Governor Urjit Patel had said, after the release of the monetary policy statement, that the fall in the value of the rupee against the dollar is moderate in comparison to emerging market peers. "The RBI's response to these unsettled conditions has been to ensure the foreign exchange market remains liquid with no undue volatility," he had said.
- Some analysts say crude oil prices are spoiling the country's macroeconomics fundamentals. "Sentiments remain bearish for the rupee after the RBI disappointed market last week. Sharp volatility in the domestic equities is a matter of concern," said Rishabh Maru, research analyst at Anand Rathi Shares and Stock Brokers.
- Meanwhile, the domestic equity markets registered mild gains on Monday. The MSCI world equity index, which tracks shares in 47 countries, fell 0.35 per cent.
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