The Indian rupee weakened past 68 per dollar for the first time since September 2013, falling toward its record low, as the sell-off in emerging markets saps demand for Indian assets. The rupee weakened 0.5% to close at 67.9650 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It fell to 68.1675 earlier, within 1% of its record low of 68.845 reached in August 2013. State-run lenders sold dollars on behalf of the Reserve Bank of India around the 67.90 level on Wednesday, two Mumbai-based traders said, suggesting intervention. An email sent to RBI spokeswoman Alpana Killawala didn’t immediately get a response.
Jayesh Mehta, MD and country treasurer, Bank of America, believes the rupee is unlikely to weaken too much beyond 68.50 to the dollar. “We feel the central bank would not let it depreciate too much,” Mehta said.
The rupee has declined 2.7% this month in Asia’s worst performance after South Korea’s won. India’s currency reserves fell $2.8 billion in the two weeks ended January 8, signalling the RBI is intervening as the rupee extends losses after capping a fifth straight annual decline in 2015.
“India’s economic fundamentals are in much better shape when compared to 2013,” said Amit Agrawal, a currency strategist at Societe Generale in Bengaluru. “There’s nothing to panic about as the rupee has come under pressure due to the emerging-market sell-off triggered by the developments in China.”Agrawal said he expects the currency to strengthen to 67.20 by March 31.
Global funds sold a net $714 million of local shares in the four days through January 19, taking withdrawals for the month to $1.2 billion, the latest exchange data compiled by Bloomberg.
show. Foreign holdings of rupee-denominated debt fell in each of the last four days, the longest stretch in a month. A gauge of Asian equities tumbled to a three-year low on Wednesday amid China’s market turmoil and waning investor confidence about global growth.
“The rupee is impacted by the broad risk-off sentiment across Asia,” said Rohan Lasrado, the head of foreign-exchange trading at RBL Bank in Mumbai. “That may continue for some time as investors fret over growth.” Sovereign bonds gained, with the yield on notes due May 2025 falling three basis points to 7.75% as the RBI bought R10,000 crore of debt through its open-market operations.