NEW DELHI: The rupee on Friday settled 26 paise lower at 70.995 against the US dollar on account of month-end dollar demand from importers and rising crude oil prices.
Market experts believe that the month-end demand for the dollar from oil importers, dollar's strength against its peers on expectations of rising interest rates amid lingering Sino-US trade tensions, weighed on the domestic currency.
Earlier in the day, the local currency breached the 71 level against dollar for the first time ever.
According to Axis Capital, rupee weakness was largely to do with emerging market (EM) risk-off sentiment but Indias twin deficits made it more vulnerable. If left unchecked, it presents a dangerous spiral in the worst case scenario ie further depreciation leading to higher inflation expectation and so on.
Rushabh Maru – Research Analyst, Anand Rathi Shares and Stock Brokers said, “The rupee has made a new record low of 71 on back of rising crude oil prices in the international market. Emerging market currencies are under pressure, this has also weighed on the rupee.”
The dollar index continues to remain higher on expectations of aggressive interest rate hike by the Federal Reserve.
“The RBI is intervening very selectively to contain volatility. The RBI is unlikely to intervene aggressive as the rupee is still overvalued and currencies of EMEs are depreciating sharply. The government also seems to be comfortable even if the rupee depreciates further. Indias fiscal deficit and GDP data due to release today will provide further direction to the rupee,” said Maru.
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