` crashes below 70 mark against $, recovers at close as RBI intervenes
Mumbai: The rupee on Tuesday breached the historic low of 70-mark against the US dollar before recovering at close on suspected RBI intervention and the finance ministry's dismissing the concerns over its sharp fall.
The local currency crashed below the 70-mark in early trade to touch all-time low of 70.10 a day after bloodletting in global markets due to worries over Turkish economic crisis and a sharp plunge in the lira.
A rebound in oil prices, FII outflows and concerns over currrent account deficit weighed on the domestic currency, pushing it to fresh life-time lows.
Heavy intervention by the RBI predominantly resisted the rupee's sharp depreciation and staged a spirited recovery from its life-time low, a currency trader said.
Attributing the fall in rupee value against the US dollar to "external factors", Economic Affairs Secretary Subhash Chandra Garg said on Tuesday that there is nothing to worry about as long as the depreciation is in line with other currencies.
The rupee crashed to record low of 70.09 during the day on global concerns over Turkey's economic woes which have impacted various emerging markets amid the US dollar gaining strength against other currencies.
"Rupee is depreciating due to external factors...nothing at this stage to worry," Garg said adding external factors may ease going forward.
He said that even if the rupee falls to 80 per dollar, "it will not be a concern provided all other currencies depreciate in the same range".
The Indian currency, he said, is still better as compared to certain other currencies.
In the current financial year, which began on April 1, the rupee has depreciated around 6.7% against the US dollar.
Garg also said that while the Reserve Bank of India had sufficient foreign exchange reserves, its intervention in the currency market may not be of much help as of now, as the weakness in the rupee was a result of global factors.
RBI's foreign exchange reserves were at $402.70 billion in the week ended August 3, down $1.49 billion over the preceding week, latest data released by the central bank showed.
Meanwhile, SBI Chairman Rajnish Kumar said all currencies have weakened against the dollar, but the Indian currency has not weakened very much in comparison to other currencies.
B Prasanna of ICICI Bank said the rupee is the victim of a contagion effect impacting all Emerging Markets (EMs) triggered by the Turkish crisis.
A relief rally in local equities amid a recovery in global markets, including the Turkish lira, further supported the forex sentiment.
The Turkey's currency found its footing after two days of intense selling after the central bank announced an emergency liquidity boost to calm investors nerves. It recovered to 6.57 against the dollar and 7.50 to the euro on Tuesday from record lows hit on Monday.
On the home front, a benign domestic inflation outlook and robust industrial output data also helped strengthen the rupee sentiment.
Data showed retail inflation fell to nine-month low of 4.17 per cent and the wholesale inflation eased to 5.09 per cent in July, reducing the odds of a further rate hike.
The Indian unit finally settled at 69.69, showing a modest gain of 4 paise.
The Indian currency has lost over 9.49 per cent of its value this year so far against the grim backdrop of India's ballooning fiscal deficit and surging crude prices.
August has marked the largest devaluation of the rupee against the dollar in the past year.
On the energy front, crude prices rose after Saudi Arabia said it had cut production in July, though concerns over a slowdown in global economic growth kept a lid on markets.
The benchmark Brent rose by $0.66 to $73.27 a barrel while West Texas Intermediate firmed up 61 cents to $67.81 per barrel.
In the cross currency trade, the rupee remained under pressure against the pound sterling to end at 89.21 per pound from 89.13 and also drifted further against the euro to close at 79.69 compared to 79.52 earlier.
The local unit, however bounced back against the Japanese yen to finish at 63.05 per 100 yens from 63.37.
In forward market on Tuesday, premium for dollar dropped due to heavy receiving from exporters.
The benchmark six-month forward premium payable in December slumped to 107-109 paise from 112-114 paise and the far-forward June 2019 contract moved down to 253-255 paise from 260-262 paise on Monday.