Mumbai–The Indian rupee plunged to a record low of over 74 to a US dollar on Friday, after the Reserve Bank of India changed the policy stance to “calibrated tightening”.
In addition, a massive outflow of foreign funds along with high crude oil prices and fears over fiscal slippage led to the rupee’s downward trajectory. However, a likely intervention by the country’s central bank aided in the Indian currency’s recovery.
The Indian rupee closed at 73.77 (73.7675) per US dollar, 19 paise weaker from its previous close of 73.58.
It opened the day’s trade at the Inter-Bank Foreign Exchange Market at 73.64 (73.6375) and just after the RBI announced its decision, plunged to over 74 a US dollar — the lowest ever mark — it has touched against the greenback.
“Dollar-Rupee was once again saved by an alleged intervention from RBI. It closed 73.76 after making a high of 74.22 an intra-day all time high,” said Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities.
“No rate hike but hawkish stance triggered a sell off in equities and that caused rupee to depreciate. Near term range is 73.50-74.50.”
On Friday, the RBI belied market expectations of a rate hike. However, the “neutral” stance of monetary policy was changed to “calibrated tightening” which triggered a massive sell-off in the equities market.
In terms of foreign funds, provisional data with the exchanges showed that foreign institutional investors sold stocks worth Rs 3,370.14 crore.
“The rupee has extended losses today as the RBI monetary policy meeting has clearly disappointed the street,” Rushabh Maru, Research Analyst at Anand Rathi Shares and Stock Brokers said.
“Market was expecting at least 25 basis points repo rate hike and measures to stabilise the rupee. But the status quo in the policy has disappointed. Given the sell-off in the domestic equities and higher crude oil prices, the rupee is now expected to move towards 75-76 levels in next couple of sessions.”
According to Madhavi Arora, Economist, FX and Rates, Edelweiss Securities said: “The RBI is clearly of the view that they should let underlying trade competitiveness improve gradually as the trade-weighted exchange rate acts as a natural stabiliser.
“The currency objective has again been reiterated as managing the FX volatility and not managing any levels.” (IANS)