NEW DELHI: The rupee slipped over 1.6 per cent in trade on Monday against the dollar to post its biggest cut since 22nd September 2011.
The rupee hit a record low of 58 against the dollar in intraday trade on rising worries about the country's rising current account deficit which may get impacted further by weakness in currency.
The rupee fell as dollar gained following disappointing data from China and slightly better-than-expected US jobs data, fueling expectations that the Federal Reserve might curb its asset purchases later this year.
Following weakness in currency, the S&P BSE Sensex gave up all its intraday gains and ended flat, weighed down by losses in consumer durables, realty, banking and metal stocks.
The BSE Sensex closed 11 points higher at 19441.07. It hit a low of 19366.82 and a high of 19585.75 in trade today.
The 50-share Nifty index closed 3 points lower at 5878. It hit a low of 5857.40 and a high of 5931.65 in trade today.
According to analysts, foreign investors have been heavy sellers in recent weeks of Indian debt, which is worrisome for a country which depends heavily on foreign flows to finance its current account deficit and support its markets.
"Weakness in rupee makes it harder to finance India's current account deficit and makes imports costlier for India," Reuters said in a report.
According to analysts, the fall is largely triggered by broad gains in the dollar that is also hitting other emerging currencies such as the Japanese Yen over worries about a potential end to the U.S. stimulus programme.
Dollar's longer-term bullish outlook is expected to remain intact as the Fed will eventually start scaling down its stimulus if jobs keep on adding to its kitty.
Most analysts expect dollar index to hit 88 levels by year-end and the outlook for rupee remains bearish with target of Rs 58-60 against US dollar.
The US 10 year bond yield is inching up higher day by day on the confirmation by the US Federal Reserve on tapering the quantative easing (QE). This is ultimately making the US bond yield to trade above 2 per cent.
"While on the other hand, the Indian Federal bond yield is trading lower at 7.2 per cent and is expected to lower down further as there is increasing speculation over RBI cutting the interest rates in near future," India Forex Advisors said in a report.
"If that happens, this will further reduce the arbitrage opportunity for the foreign investors. As the returns drops, the more the pressure would exert on rupee," the report added.
We have collated views and recommendations from various experts on rupee and its future outlook:
Abhishek Goenka, Founder & CEO, India Forex Advisors
The rupee is currently on a free fall breaching the head and shoulder pattern at 55.20. The major reason that we foresee behind rupee depreciation is the rise in US treasury yield, which is leading to the unwinding of carry trade in USD/INR. The unwinding moves are very brutal and fast that's what we are seeing in rupee.
Going ahead, as long as the USD/INR is above 57.10, we expect the pair to move towards 58-60 in this week.
Shardul Kulkarni, senior technical analyst at Angel Broking
Last week, the equity market participants have finally been forced to take notice of the rupee. Despite all efforts by the government to reign in the trade deficit, the rupee continues to be a cause of concern.
We were also fortunate to get substantial inflows via FII investments. Despite of all these factors, the rupee is now trading almost near its all-time low. The consistent demand for the greenback is on account of the yellow metal. The technical outlook on the rupee suggests that 58 may soon be tested.
Saurabh Mukherjea, Head of Equities, Ambit Capital
I would rather focus on the fact that FII appetite for India still remains healthy, a big portion of long-only focused FIIs are still focused on increasing the exposure to India and that bodes very well for us going into the months of June and July.
SOURCE : http://economictimes.indiatimes.com/markets/forex/rupee-hits-record-low-of-58-vs-dollar-posts-biggest-drop-since-22-september-2011/articleshow/20521042.cms
The rupee hit a record low of 58 against the dollar in intraday trade on rising worries about the country's rising current account deficit which may get impacted further by weakness in currency.
The rupee fell as dollar gained following disappointing data from China and slightly better-than-expected US jobs data, fueling expectations that the Federal Reserve might curb its asset purchases later this year.
Following weakness in currency, the S&P BSE Sensex gave up all its intraday gains and ended flat, weighed down by losses in consumer durables, realty, banking and metal stocks.
The BSE Sensex closed 11 points higher at 19441.07. It hit a low of 19366.82 and a high of 19585.75 in trade today.
The 50-share Nifty index closed 3 points lower at 5878. It hit a low of 5857.40 and a high of 5931.65 in trade today.
According to analysts, foreign investors have been heavy sellers in recent weeks of Indian debt, which is worrisome for a country which depends heavily on foreign flows to finance its current account deficit and support its markets.
"Weakness in rupee makes it harder to finance India's current account deficit and makes imports costlier for India," Reuters said in a report.
According to analysts, the fall is largely triggered by broad gains in the dollar that is also hitting other emerging currencies such as the Japanese Yen over worries about a potential end to the U.S. stimulus programme.
Dollar's longer-term bullish outlook is expected to remain intact as the Fed will eventually start scaling down its stimulus if jobs keep on adding to its kitty.
Most analysts expect dollar index to hit 88 levels by year-end and the outlook for rupee remains bearish with target of Rs 58-60 against US dollar.
The US 10 year bond yield is inching up higher day by day on the confirmation by the US Federal Reserve on tapering the quantative easing (QE). This is ultimately making the US bond yield to trade above 2 per cent.
"While on the other hand, the Indian Federal bond yield is trading lower at 7.2 per cent and is expected to lower down further as there is increasing speculation over RBI cutting the interest rates in near future," India Forex Advisors said in a report.
"If that happens, this will further reduce the arbitrage opportunity for the foreign investors. As the returns drops, the more the pressure would exert on rupee," the report added.
We have collated views and recommendations from various experts on rupee and its future outlook:
Abhishek Goenka, Founder & CEO, India Forex Advisors
The rupee is currently on a free fall breaching the head and shoulder pattern at 55.20. The major reason that we foresee behind rupee depreciation is the rise in US treasury yield, which is leading to the unwinding of carry trade in USD/INR. The unwinding moves are very brutal and fast that's what we are seeing in rupee.
Going ahead, as long as the USD/INR is above 57.10, we expect the pair to move towards 58-60 in this week.
Shardul Kulkarni, senior technical analyst at Angel Broking
Last week, the equity market participants have finally been forced to take notice of the rupee. Despite all efforts by the government to reign in the trade deficit, the rupee continues to be a cause of concern.
We were also fortunate to get substantial inflows via FII investments. Despite of all these factors, the rupee is now trading almost near its all-time low. The consistent demand for the greenback is on account of the yellow metal. The technical outlook on the rupee suggests that 58 may soon be tested.
Saurabh Mukherjea, Head of Equities, Ambit Capital
I would rather focus on the fact that FII appetite for India still remains healthy, a big portion of long-only focused FIIs are still focused on increasing the exposure to India and that bodes very well for us going into the months of June and July.
SOURCE : http://economictimes.indiatimes.com/markets/forex/rupee-hits-record-low-of-58-vs-dollar-posts-biggest-drop-since-22-september-2011/articleshow/20521042.cms
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