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The rupee on Thursday drifted to a new low, hitting 77.80 against the dollar in intra-day trades, and ending the session at 77.77. The immediate reason for the weakness in the currency, experts said, was the spurt in the global price of Brent crude oil to over $124 per barrel and the apprehension that could adversely impact India’s current account deficit.
All Asian currencies lost value on Thursday, especially the Japanese yen, ahead of the meeting of the European Central Bank (ECB) meeting at which rates were expected to be raised.
Dealers said the Reserve Bank of India (RBI) had intervened, to a very small extent, at higher levels. Dipti Deodhar, senior V-P, Mecklai Financial, said that external factors such as the high demand for oil in the US, and a strong dollar, have been weighing on the rupee. The dollex has been on an uptrend for the past week or so and on Thursday evening was ruling at 102.233.
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Experts expect the rupee to trade in a range of `77.50-78 over the next month or so. They believe that while the RBI may not intervene to arrest the depreciation in the currency, it would try to minimise the volatility in the market.
India’s trade deficit widened to $23 billion in May. Exports grew by 15.4% year-on-year to $37.3 billion and fell 7.2% month-on-month. Imports, however, rose 56.1% to $60.6 billion.
Suvodeep Rakshit, senior economist, Kotak Institutional Equities, said the forex outlook could remain uncertain, given there is room for the dollar to strengthen as policy is tightened and there is a normalisation of the real interest rate differential. “However, India’s foreign exchange buffer of around $600 billion, excluding the forwards book, should help shield the economy against any major external shock,” he said.
Foreign portfolio investors (FPI) continue to sell Indian stocks; since October they have sold close to $29 billion worth of equities.
The markets are also nervous following a report by Goldman Sachs which has forecast crude oil prices at $140 per barrel in the July-September period. Thereafter, prices are likely to trend down to $130/barrel in the October-December period.
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