Mumbai, June 24 (IANS) Britain’s decision to opt out of the European Union (Brexit) exerted pressure on the rupee, even as a likely intervention by the country’s central bank tried to arrest the steep fall on Friday.
The Indian rupee weakened by 64 paise during the late afternoon trade (2.45 p.m.) at 67.90 against a US dollar from its previous close of 67.25-26 to a greenback.
The rupee had dived over 1.4 per cent to 68.21 per dollar during the intra-day trade so far, while the British pound — that had rallied to nearly $1.5 in the early trade — fell sharply to its lowest level since 1985 at $1.35.
According to currency analysts, the rupee stabilised after a likely market intervention by Reserve Bank of India (RBI) which sold US dollar through state-run public lenders.
The stock markets too depreciated considerably.
The sensitive index (Sensex) of the BSE, which had closed on Thursday at 27,002.22 points, opened the next morning at 26,367.48 points. At around 2.45 p.m., it stood at 26,325.82 points, down 676.40 points, or 2.50 per cent. At one point, it had lost nearly 1,090 points.
At the National Stock Exchange (NSE), where the 51-scrip Nifty had closed at 8,270.45 points, the opening bell was at 8,029.10 points. Thereafter, the index was ruled around the 8,000-points mark at 8,061.30 points, down 209.15 points, or 2.53 per cent.
Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities said: “Over the short run we expect volatility to stay very high, as central banks intervention to stabilise asset prices and market’s attempt to reduce leverage and risk create a perfect storm in financial markets.”
“Emerging market currencies like rupee, is exposed to this kind of volatility. Though our macros are sound, but weak growth environment and expensive valuation of risk assets can cause rupee to depreciate against US dollar and Yen.”
Banerjee predicted the rupee to remain in the broad range of 67-69 over the medium term.
According to Hariprasad M.P., Senior Vice President and Head, Treasury and Banknotes Business with Centrum Direct Brexit came in as a shocker to markets which expected Britain to remain in the EU.
“As regards USD/INR, the first levels to watch would be the all-time high of 68.80 and if the pair breaches that, we will see the Rupee sliding further towards 69.50/70.00 by the end of September this year,” Hariprasad said.
“By far, the rupee has stood its ground and is relatively stable right now. The markets look forward to further news and the impact of Brexit for further direction.”