The Indian rupee remained under pressure on Thursday, closing at 68.0250 as foreign portfolio investors (FPIs) continued to take risk off the table. FPIs have sold equities worth $1.8 billion in January so far and, moreover, in the last five sessions have also sold rupee-denominated debt worth $240 million.
Reserve Bank of India (RBI) governor Raghuram Rajan in an interview to Bloomberg Television at the World Economic Forum in Davos, Switzerland, on Thursday said that the central bank doesn’t have a target in mind for the currency. Rajan said the RBI doesn’t stand in the way of rupee adjustment and that the currency’s fair value is “what it is”.
“What we do want to ensure is we don’t get excess volatility,” Rajan said, pointing out that,over the year, the real effective exchange rate of the rupee had remained fairly flat. “ In fact over a year and a half. So I think broadly we are in the right ball park,” the governor observed.
On Wednesday, both the one-month and the three-month non-deliverable forward (NDF) rates for the Indian currency had hit lows last seen in September 2013.
On Thursday, the one-month offshore rupee NDF stood at 68.39 to the dollar at 5.43 pm, having traded in the range of 68.22 to 68.49 during the day. The three-month rupee NDF stood at 69.04 to the dollar, having traded in the range of 68.92 to 69.18 during the day.
Movement in the offshore NDF market is an indication of how overseas investors perceive the value of the currency in the near future.
Market watchers say the sell-off in emerging market assets and concerns on China’s slowing economy continue to weigh on the stock and currency markets worldwide. Many believe that the rupee could drop to 68.50 levels, though they feel the central bank might take steps to arrest any slide thereafter.