Rupee erases early losses to end flat

Reuters: The rupee hit a near-record low yesterday as weakness in emerging market currencies weighed, but later recovered to end the day flat, dealers said.

The rupee, which hit an intraday low of 160.15 per dollar, ended at 160.00/10, unchanged from Friday’s close. It hit a record low of 160.17 on 20 June and has declined 4.2% so far this year.

“There was importer demand early in the day and it was usual demand. There was no new demand. The global worries have hit the sentiment,” said a currency dealer, asking not to be named. “The Central Bank has been doing the correct thing by allowing the market to decide the exchange rate. The rupee has been hovering around the 160.00 level for the past two months, but heavy foreign outflows from government securities may trigger a sharp depreciation.”

The euro slid to a fresh 13-month low and emerging market currencies slumped further yesterday while the yen surged to a six-week high as the fallout from the Turkish lira’s crash pushed more investors into safe haven currencies. On 3 August, the Central Bank left its key policy rates unchanged, saying the decision backed its goals of stabilising inflation and fostering sustainable economic growth. Central Bank Governor Indrajit Coomaraswamy had told reporters that several emerging market currencies had declined more than the rupee, adding” “If we reduce rates, that would put further pressure on the exchange rate.” Earlier this month, Sri Lanka raised import duties on small hybrid cars by more than 50% to boost revenue and curb a sharp fall in the rupee. Coomaraswamy had said earlier that the rupee’s decline was driven mainly by external factors. Foreign investors sold government securities worth a net Rs. 2.56 billion ($ 16.01 million) in the week ended 8 August, bringing the outflow so far this year to Rs. 39.1 billion, Central Bank data showed.

Indian Rupee hits record low, mild RBI intervention seen

MUMBAI (Reuters): The rupee on Monday touched an all-time low of 69.62 per dollar in early trade, tracking broader weakness in other emerging market currencies on concerns of a spill-over from a crisis-hit Turkey.

The Reserve Bank of India was seen intervening to stem a sharp fall in the rupee, two dealers said.

“The RBI was there to curtail the volatility in early trade, but not in a big way,” said a senior dealer at a foreign bank.

The rupee reversed marginally from its record lows to trade at 69.53 to the dollar. It had ended at 68.84 to the dollar on Friday. The 10-year benchmark bond yield rose to 7.80% from its previous close of 7.75%, tracking the weakness in rupee.

Investors preferred safe-havens such as the US dollar and the yen after a plunge in the Turkish Lira sent all emerging market currencies sharply lower.

The lira has fallen about 45% against the greenback this year on worries over Turkish President Tayyip Erdogan’s increasing control of the economy and a deepening diplomatic rift with the United States.

“There is no point spending a lot of dollars in defending a rupee when the force of the fall is so strong across emerging markets,” said a senior forex dealer at an Indian state-run bank.

The next crucial level for the rupee is 69.80 to the dollar, he added.

Traders will also watch out for India consumer inflation data for July due after market hours for further direction. A Reuters poll estimates July inflation of 4.51% compared with a five-month high of 5.0% hit in the previous month.