In the second time in a little over six months, the Indian rupee declined past the key psychological mark of 82 per dollar on Tuesday. The last time it slid past the greenback was on October 6 last year, when at the interbank foreign exchange market, the local currency opened at 82.19, then fell further to 82.43. It finally settled at an all-time low of 82.30 against the American currency, registering a decline of 13 paise over its previous close.
On Tuesday, the rupee finished at 82.1250 to the dollar, having declined up to 82.15 during the session. It closed at 81.98 in on Monday.
Persistent dollar-buying when the dollar index is weaker indicates there is an outflow, a trader explained. However, financial analysts and dealers were not able to clearly identify the nature of the outflow. They also cited importer demand through the session.
So far, companies and bankers have had a bias towards rupee appreciation on improving macro-economic fundamentals and carry trade appeal.
“We think most investors are yet to price in the structural changes in the current account deficit (CAD) over the last few quarters,” Anubhuti Sahay, head of South Asia Economic Research (India), Standard Chartered Bank wrote.
“A sharp pick-up in services exports, increased smartphone exports and savings in the oil import bill… have likely altered India’s CAD permanently.”
It maybe recalled that on Thursday, the rupee settled at 81.85 against the dollar. Domestic forex and equity markets were closed on Friday on account of Ambedkar Jayanti.
This week the rupee would take cues from the India and U.S. inflation data, both, due Wednesday, with the former considered more crucial by traders.
The U.S. data will be instrumental in the Federal Reserve’s decision on whether to raise rates at its May meeting, which is leaning towards a 25 basis point (bps) hike following the U.S. jobs report, futures showed.
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