The Indian rupee has continued its poor run reaching another record low amid foreign investors’ sustained sell-off of the nation’s equities. The rupee dropped to as low as 80.06 per dollar on Tuesday before retreating on Wednesday as traders anticipated intervention from the country’s apex bank.
The Indian rupee has been heavily battered, following over $30 billion in foreign outflows from the nation’s equity, a record sum that has raised concerns from relevant government agencies.
There has been an attempt by policymakers via raft measures to resolve the rupee’s decline. Besides government intervention, policymakers have also suggested raising duties on gold imports. Unfortunately, experts believe a weaker rupee will add to imported inflation pressures.
It isn’t only the rupee that is taking a beating lately. Other emerging market currencies are also suffering a similar fate as a hawkish Federal Reserve attempts to lure capital to the U.S.
According to Dhiraj Nim, economist and FX strategist at Australia and New Zealand Banking Group LTD, there are indications that the rupee could weaken further. He added that oil prices have remained volatile as the Fed looks to continue its tightening measures.
Indian Central Bank believes the currency value is on track
Meanwhile, the Indian central bank isn’t worried about the rupee’s decline, stating that the country’s currency is moving towards its fair value. The apex bank added that it would sell dollars from its reserve if it noticed a genuine shortfall. In the meantime, traders anticipate the RBI to intervene as the rupee breached 80 to a dollar in the forex market.
The rupee has performed poorly this year, losing 7% of its value following a shortfall in the country’s current account. Wednesday’s trading session saw the rupee trading between 79 to 80 against the dollar, and things will most probably remain the same for the rest of the day.
Earlier this month, Governor Shaktikanta Das stated that the country’s central bank backs an orderly appreciation or depreciation of the rupee and will intervene in all markets to address volatility.
Despite analysts looking forward to government intervention to strengthen the rupee, many traders are bearish on the rupee, with forecasts that the rupee could go as low as 82 to a dollar by September.