Mumbai: The rupee plummeted to 13-month low of 63.53 against dollar on Tuesday due to heavy demand for dollars by importers and some banks after Russia increased interest rates sharply on global growth concerns. This move sent ripples across markets in Asia and India as crude oil prices continued to fall reinforcing the gloomy global growth prospects.
According to an agency report, the volatility in global markets is now bound to test India’s appeal at a time of high hopes the Reserve Bank of India would cut interest rates as early as at its next policy review in February.“If the rupee weakness sustains for long, then we could see a delay in rate cuts,” Hari Chandram-gethen, head of foreign exchange trading at SIB, told Reuters.
India’s commerce secretary Rajeev Kher said, “it would be of concern if the rupee stayed below the level of 63 against dollar for long and it is only the 60-62 band which reflected a good exchange rate. The rupee closed at 63.78 to the dollar on Tuesday. Mr Kher who inaugurated the India Engineering Sourcing Show (IESS), organised by the EEPC India in Mumbai said they had to keep in mind the interest of both the importers and exporters.
Whilst the exporters he said feel the rupee in the 60-62 band was good, India had a very strong import bias, so “the exchange value has to be a balanced value so that on either side we can keep an interest between our exporters and importers,” he said.
Meanwhile agencies said that dealers in foreign exchange said the RBI may have intervened in the markets but it seemed dollars selling through state-run banks did not pay off. They also predicted that the rupee is likely to breach the 64-mark as early as Wednesday. At the Interbank Forex market, the rupee commenced sluggish at 63.25 a dollar.
The foreign institutional investors have been heavy sellers in the last one week. Tuesdaey’s fall of the rupee has been the worst single day loss in more than four months. The rupee had tumbled by 65 paise on Monday. “The Reserve Bank was likely there in the market to smoothen the weakness. They came at 63.50 level,” said a dealer.
