Monday, 12 November, 2018

India's currency falls to all-time low against US dollar

Rupee fall moderate when compared with emerging market peers, says RBI governor Urjit Patel India's currency falls to all-time low against US dollar
Nellie Chapman | 04 October, 2018, 15:29

One forex dealer at a foreign bank, who asked not to be named, said early intervention by the central bank stopped the rupee from hitting 74 per dollar, but it is still down 13.3 percent since the start of the year, making it the worst performer among Asia's emerging market currencies. Brent crude oil is now trading near United States dollars 85/bl, at the highest level since November 2014.

An expected rate hike would be the Reserve Bank of India's (RBI) third this year, after it lifted borrowing costs in June and August.

India's currency fell Wednesday to its lowest-ever level against the US dollar.

The markets will remain closed on Tuesday on account of Gandhi Jayanti.

Mr Khoon Goh, head of Asia research at ANZ Banking Group in Singapore, said the mix of strong USA data and the Fed chair's comments bumped up the dollar and USA bond yields, putting downward pressure on Asian currencies.

"A stronger dollar along with soaring oil prices have magnified the rupee decline".

India's gold imports are expected to rise further in the fourth quarter, putting the trade balance under more pressure, as investors seek hedges against faltering equities and the weak rupee.

Traders are now cautious and are awaiting the RBI's bi-monthly policy on Friday.

Meanwhile, Brent crude oil near USD 85 a barrel, the rupee weakening by 43 paise to hit an all-time low of 73.41 against the dollar, and a mixed trend in other Asian markets also influenced trading sentiment here. Of 15 economists surveyed by Mint, 14 expect the RBI to raise the repo rate, the rate at which it lends to commercial banks, to 6.75%.

The IL&FS debt problems have pushed up short-term interest rates sharply with one-year commercial paper rising by almost 70 basis points to 9.20 percent since early August, while the one-year treasury bill rate is up 50 bps to 7.73 percent.