Even as the rupee breached the crucial 71 level plumbing a new life-time low today, State Bank said one should not get too much worried about a “little bit of depreciation” as the currency is still “overvalued”. The rupee has been the worst among the large emerging market peers, losing over 10 per cent from the beginning of the year. But SBI managing director PK Gupta told reporters that the rupee has been faring better than many of its peers, including the Turkish, Argentinean, and Indonesian currencies.
“You need to look at what’s happening globally. Argentina, Indonesia…most of the currencies are losing against the dollar. In fact, the fall of the rupee against the dollar has been much lesser compared to most other currencies,” Gupta said. “I don’t think the value of the rupee is so much of a concern now. The unit is overvalued in any case. A little bit of depreciation should not impact too much at this stage,” he added.
The rupee slumped to a fresh record low of 71 against the dollar for the first time ever by falling 26 paise on persistent demand for the greenback amid rising crude prices and projection of a further spike going ahead. At the interbank foreign exchange market, the rupee opened sharply lower at 70.95 and slipped further to hit its lifetime low of 71 from its previous close of 70.74.
Forex dealers said besides robust month-end demand for the dollar from oil importers, the strength of the dollar is rising against its rival currencies on expectations of rising interest rates in the US amid lingering trade wars between the US and China, weighed on the domestic currency.
Yesterday, the rupee slid 15 paise to close at a fresh lifetime low of 70.74 due to strong demand for the greenback from oil importers and surging crude prices, stoking inflation fears which anyway has been on a northward ho for the past many months now.
Growing fears about rising inflation amid high global crude prices and consistent selling by foreign funds from the domestic equity markets also weighed on the rupee. Benchmark Brent crude was at trading at USD 78 a barrel in early Asian trade.