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Currency weakens for the fifth straight session; crude prices soften
The rupee continued to weaken for the fifth straight session as it hit a fresh closing low on Monday amid strengthening of the dollar and in the absence of aggressive intervention by the Reserve Bank of India. The rupee opened 14 paise lower compared with its previous close of 73.76 as the dollar strengthened against all major currencies. The currency touched day’s low of 74.10 before closing at an-all time low of 74.06 a dollar, down 30 paisa. On Friday, after the monetary policy announcement by the RBI that decided to keep the interest rate unchanged, the rupee plunged to a historic low of 74.22 a dollar. The rupee weakened on Monday despite crude prices softening from the more than $86-a-barrel level. “There has been some respite from crude as Brent has cooled down to $82.89-odd levels from the four-day high of $86.74. However, the impact of falling crude was not seen on the rupee mainly due to the strong dollar index and high U.S. bond yields,” said V.K. Sharma, head, private client group and capital market strategy at HDFC Securities. Market participants were expecting steps from the central bank to support rupee. However, the RBI maintained it does not target any particular level of the rupee and went on to say the rupee’s depreciation was moderate as compared with other emerging market currencies. “The RBI’s response to these unsettled conditions has been to ensure that the foreign exchange market remains liquid with no undue volatility,” the central bank had said. Demand for dollar strengthened after China’s central bank decided to cut reserve requirement ratio by 1% from October 15 which would infuse $109.2 billion into the banking system. The move was aimed at boosting fragile growth amid slowing exports.
‘Taming inflation a key’
“Rupee has taken a beating as the RBI reiterated that inflation management remains its sole policy objective and policy action will not be premised on anchoring the currency,” said Madhavi Arora, economist, FX and rates, Edelweiss Securities. “The RBI subtly suggested that FX markets are fluid and should let rupee find its fair equilibrium,” she said.
Source : https://www.thehindu.com/todays-paper/tp-business/rupee-hits-fresh-low-of-7406-vs-dollar/article25161940.ece
