1. Indian rupee breaches 63 per US dollar mark, closes at over three-month low

Indian rupee breaches 63 per US dollar mark, closes at over three-month low

The Indian rupee had plummeted to a record 68.845 against US dollar in August 2013.

By: | Mumbai | Updated: April 24, 2015 11:54 AM
rupee to dollar

The Indian rupee plunged by 50 paise to a three-month low of 63.32 against the US dollar on heavy demand for the US currency from banks. PTI

The Indian rupee plunged by 50 paise to a three-month low of 63.32 against the US dollar on heavy demand for the US currency from banks and importers and capital outflows from the capital market.

After opening at 62.97, the rupee moved in a range of 45 paise between 63.34 and 62.89 against the dollar. “The market has witnessed a sell-off in the last one week, leading to capital outflows.

The FII tax issue has added to the currency weakness. The coming days will also see dollar demand to the tune of $ 3.2 billion as Daiichi is exiting India after selling its stake in Sun Pharma. Reports of weak monsoon are another big worry,” said a dealer.

Going by the Real Effective Exchange Rate (REER), the rupee is 12 per cent overvalued. The immediate trigger has been the soft sentiment because of the minimum alternate tax (MAT) issue amongst foreign investor inflows and also the IMD prediction that monsoon could be below normal. The Indian currency had plummeted to a record 68.845 a dollar in August 2013 after the US Federal Reserve’s signal that it would withdraw monetary stimulus triggered an exodus of funds from emerging markets.

The Reserve Bank of India is unlikely to sell dollars in a big way in order to favour a further retreat in the rupee to combat the slump in exports. Earlier this month, RBI Governor Raghuram Rajan said the rupee’s relative strength is pressuring margins of some exporters.

Meanwhile, the Sensex on Thursday fell by 155 points to 27,735.02 as government’s clarification on taxation policies failed to soothe nerves of investors, leading to profit taking in blue-chip stocks such as State Bank of India.

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