Indian unit was again the worst performer in the region, shedding 0.42% to the dollar. But most other Asian currencies lost too
The rupee has now become one of the worst-performing emerging markets currency on a weekly basis
The rupee crossed 75 a dollar on Monday as local equities markets witnessed a huge sell-off.
The local currency closed at 75.06 a dollar, from its previous close of 74.73 a dollar. In intraday trade, the rupee fell to 75.145 a dollar. Sensex, the benchmark equity index of the BSE, fell 1707.94 points, or 3.44 per cent, to close at 47,883.38 points.
The rupee was again the worst performer in the region, shedding 0.42 per cent to the dollar. But most other Asian currencies lost too.
The RBI reportedly intervened in both the over-the-counter and exchange market to stem a rapid fall, say currency dealers. The dollar remained largely flat against other major currencies.
Currency dealers say foreign investors continue to wind up their carry positions in the offshore market, causing rupee to fall. But a correction in the rupee was somewhat overdue. It had remained the best performing currency in the region for well over a month till the RBI policy last week. In the policy, the Reserve Bank of India (RBI) announced its own version of quantitative easing by committing to buy Rs 1 trillion of bonds from the market in the first quarter.
“There is now excess liquidity of Rs 7 trillion in the reverse repo basket and there will be an infusion of Rs 25,000 cr on the 15th of this month. So much liquidity in the system is not good news for the rupee,” said Madan Sabnavis, chide economist of CARE Ratings.
“Add to this the panic attack of the pandemic-induced lockdown and the news of shortage of vaccine, the economy does not look as strong as was conjectured,” Sabnavis said.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the rupee can technically reach 75.70 a dollar level. “The USD-INR Spot pair could trade in a range of 74.90-75.40 levels in the coming session,” Iyer said.
The rupee has now become one of the worst-performing emerging markets currency on a weekly basis, even below Turkish lira and Russian rouble.
But monthly and on a year-to-date basis, the rupee is reasonably well placed. During this time, the rupee has lost 2.6 per cent against the dollar, but the lira and Brazil’s real have fallen nearly 10 per cent.
The pressure on rupee is expected to continue for some more time, but currency dealers say the local currency should ideally scale back when the dollar flows resume.
In any case, rupee was relatively overvalued against its competitors. The fall corrects some of those imbalances.