Mumbai: The Indian rupee hit a lifetime low of 58 per dollar at 3.55pm on Monday on continued dollar strength against emerging market as well as major global currencies.
The domestic currency opened at 57.18 and rapidly weakened after that. The currency had closed at 57.06 per dollar on Friday.
The dollar index, which measures the greenback’s strength against major world currencies, strengthened 0.19% to reach 81.831 at the time of filing this story.
“The rupee has weakened because of the dollar strength against emerging market currencies and also because foreign funds have divested from the Indian debt market, pulling out about $3 billion in the last two to three weeks,” said Pradeep Khanna, head of forex trading at HSBC Holdings Plc’s local unit.
“It looks like this weakness will continue for the next 10 to 15 days …,” he added.
However, some traders are expecting the rupee to inch back from the present level because of improved economic fundamentals.
“We expect the rupee to come back because the fundamentals have improved with inflation lower, some foreign direct investment and improved fiscal situation. If commodity prices come down it will help the currency; however, the risk is that the currency weakness will deteriorate the fundamentals,” said Ananth Narayan, regional head of fixed income, currencies and commodities in South Asia at Standard Chartered Plc.
The rupee’s weakness has also clouded the Reserve Bank of India’s (RBI’s) ability to cut interest rates because a rate cut will have an impact on capital flows into the country that are needed to finance India’s record current account deficit.
The RBI is fast losing its capability to intervene in the currency market with its foreign reserves sufficient only to finance imports for about six months. Since 2008, the central bank has sold about $60 billion in the spot and forwards market to strengthen the currency.
At 4 pm, the rupee was trading at 57.93 per dollar, according to Bloomberg data.
