With the rupee hitting a record low of 68.86 level intra-day, the market now expects it to slip further to the 70 level by March even though heavy Reserve Bank intervention today saved the day to an extent.
The rupee opened at 68.76, touched a record low of 68.86 before noon, but closed at 68.73 against the US currency as the central bank pumped nearly half a billion worth of dollars to prop it up. The unit had fallen to a lifetime low of 68.85 on August 28, 2013 due to Fed taper tantrums.
“We see the rupee falling to 70 levels by March next year,” treasurers at two state-run banks told PTI.
On the market intervention by RBI, another public sector treasurer said, “RBI was seen in the market at various levels. It is likely that they have sold $500 million to salvage the currency.”
Marketmen said the RBI intervention was seen at 68.84-68.85 levels. However, once the rupee got stable at 68.75-68.76, RBI’s presence was not much felt, traders said.
The rupee has been on a downward trend due to continued dollar strength and outflow from overseas investors. Investors are also concerned about the likely impact on growth due to demonetisation.
“FPIs’ action is based on Donald Trump’s victory as the US President and in anticipation of a hike by the Federal Reserve,” Lakshmi Vilas Bank Executive Director N S Venkatesh told PTI.
Bankers termed the current fall in the currency as a “knee-jerk reaction”, saying it is more of being event-based.
“It is not the weakness of the rupee, but the strength of the greenback,” Federal Bank ED and CFO Ashutosh Khajaria said.
Venkatesh said, “The present fall is event-based and not due to any fundamental issues as in the past. Last time, when the currency touched the record low, our fundamentals were very weak. But today, we are in a very strong position with low inflation, narrow current account deficit and high forex reserves.”