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Aug 2013
Rupee touches 62/$, may fall further

The rupee recorded yet another lifetime closing low on Friday as foreign investors fled both equity and debt markets fearing tougher forex restrictions from the  authorities concerned.

At 61.71 against the US dollar, the local currency ended the day down 26 paise, or 0.4%, compared with Thursday’s close.

The rupee even touched the psychological mark of 62.00 in early trade on Friday.

However, timely spot dollar sales by the Reserve Bank of India (RBI) and a reassurance from the government that there were no “capital control” measures in the pipeline lifted it off the day’s lows, said dealers.

Over the week, the rupee fell 1.4% after appreciating 0.4% last week.  

The rupee was among the worst performing currencies in emerging markets on Friday, second only to the Brazilian real, which fell 0.5% against the globally strong dollar.

The dollar index, as measured against six major currencies of the world, rose to 81.32 from 81.18 on Thursday.

Going forward, the rupee is expected to tumble further versus the greenback despite recent measures taken by the government and the RBI.

For instance, on Wednesday, the RBI had curbed forex outflows in the form of outward remittances by individuals and overseas direct investments by Indian companies. It also barred usage of forex by resident Indians to buy any properties abroad.  

“These measures would keep foreign investors at a distance from India,” said Sugandha Sachdeva, assistant vice-president, Religare Securities. She said such steps could deepen uncertainty and lead to more foreign fund outflows from emerging markets.

Sachdeva expects the rupee to fall to 63.50 in the coming days.

According to BSE, foreign institutional investors (FIIs) net sold Rs 563 crore in the Indian equity market on Friday. Yield on the 10-year benchmark government bond rose to 8.8%, indicating an FII sell-off in the debt market as well.

“We feel that it is only a question of time before the rupee breached the 62.00 level and rallied towards the 63.00 mark or beyond in a short span of time,” said Param Sarma, director and CEO at NSP Treasury.

The rupee has depreciated 11% since mid-May, when the US Federal Reserve had indicated tapering of its quantitative easing. Better-than-expected jobs data from the US on Thursday only intensified fears that an early tapering could well be on the cards.