Following nearly $30 billion in foreign capital leaving the country’s equity market so far this year and worries about a deteriorating current-account deficit fueled by high oil and commodity prices, the rupee went on to drop to a historic low on Tuesday, touching 80.06 to the dollar, according to news agency Bloomberg.
At 80.06 to the dollar on Tuesday, the rupee fell. Concerns over a worsening current-account deficit amid increased oil and commodities prices have also weighed on the currency. This year, foreign investors have pulled nearly $30 billion from the country’s equity markets, a record amount.
According to Dhiraj Nim, economist and FX strategist at Australia & New Zealand Banking Group, “the chances for the rupee to drop further exist,” according to a Bloomberg report. While external headwinds resulting from Fed tightening may persist, oil prices in particular continue to be somewhat variable. The trade deficit is still substantial.
According to Governor Shaktikanta Das earlier this month, the Reserve Bank of India (RBI) is intervening in all market segments to reduce volatility and supports a currency’s orderly appreciation or depreciation. The Singapore Indian Chamber of Commerce and Industry event on Tuesday included Das, who said, “We don’t have a level in mind, but our objective is to guarantee there is orderly progression of rupee in both ways.”
The central bank also unveiled plans to boost its foreign exchange holdings, which as of July 1 had fallen to their lowest level in more than 14 months, totaling $588.3 billion.
