Mumbai, Aug 31 (IANS) Fears over the rise in global trade protectionist measures, coupled with consistent outflow of foreign funds as well as volatile crude oil prices, pulled the Indian rupee to a fresh low of over 71 to a US dollar on Friday.
In addition, caution ahead of key macro-economic growth data as well as a rise in demand for US dollars dampened rupee’s prospects.
On an intra-day basis, the Indian rupee plunged just over 71 — the lowest ever mark — against the greenback at the Inter-Bank Foreign Exchange Market. It surpassed the previous record low of 70.85 to a greenback.
The Indian currency closed the day’s trade at a new record low of 70.99-71 per US dollar, 25 paise weaker than its previous close of 70.74 per greenback.
“Dollar-Rupee touched life time high of 71 on spot today. Oil prices have been a major factor that has weakened rupee. Brent crude is trading at $78, $2 short of this year’s high,” said Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities.
“Emerging market currencies are under pressure. Currencies of China, Indonesia, Turkey, Argentina, Brazil, Russia and South Africa are all depreciating.”
Apart from high crude oil, outflow of foreign funds from the Indian equity and bond markets has had an adverse impact on the rupee.
Investment-wise, provisional data with exchanges showed that foreign institutional investors sold scrips worth Rs 212.81 crore.
Besides, caution prevailed for the better part of the day on account of upcoming GDP and fiscal deficit data points.
However, an upswing in manufacturing activity accelerated India’s GDP growth rate in the first quarter of 2018-19 to 8.2 per cent, which should support the currency in the coming days.
“Market may get some solace from the positive GDP data numbers released today evening. This should be softening some pressure on local currency… But market is expecting some more relief measures to help the local currency,” said Sajal Gupta, Head Forex and Rates, Edelweiss Securities.
According to Rushabh Maru — Research Analyst, Anand Rathi Shares and Stock Brokers, the Reserve Bank of India (RBI) is unlikely to intervene aggressive as the rupee is still overvalued and currencies of EMEs (emerging market economies) are depreciating sharply.
“The government also seems to be comfortable even if the rupee depreciates further,” Maru said.
The RBI is known to enter the markets via intermediaries to either sell or buy US dollars to keep the rupee in a stable orbit.