Rupee hits a 3-year low of 68.86 despite RBI support

news
24 November 2016

The Indian rupee fell to its lowest level in three years, hitting 68.86 against the US dollar today, despite the Reserve Bank of India (RBI) actively intervening in the forex market. The rupee, like other emerging market currencies, plunged under pressure of a rallying US dollar and capital outflows from emerging markets.

Despite repeated interventions by the central bank to slow the slide, the rupee breached its previous low of 68.85 to the dollar set in August 2013, when the Indian currency was roiled in the worst currency crisis in more than two decades.

The RBI India intervened again in the afternoon, after spending around $500 million in the morning, but the rupee was able to claw back only a fraction of its losses.

The falling rupee also pulled down equities and hammered the key market indices amidst the government's demonetisation drive that hit cash-backed liquidity and investor confidence besides creating a political logjam.

The key Indian indices provisionally closed with losses of more than half a per cent each, as banking, automobile and healthcare stocks witnessed heavy selling pressure.

The wider 51-scrip Nifty of the National Stock Exchange (NSE) receded by 67.80 points or 0.84 per cent to 7,965.50 points.

The benchmark 30-scrip BSE sensitive index (Sensex), which opened at 26,049.14 points, provisionally closed at 25,860.17 points down 191.64 points or 0.74  per cent compared to the previous close of 26,051.81 points.

Over the past several years, the RBI has steadily accumulated foreign exchange reserves, which hit a record high of $371.99 billion at the end of September.

India is also still seeing outflows tied to the redemptions of dollar deposits, expected to total around $28 billion, that were raised from Indians living abroad to help pull the rupee out its crisis three years ago.

The rupee has fallen around three per cent so far this month, its biggest fall against the dollar since August 2015.





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