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Mumbai: The rupee On Wednesday he surpassed the mark of 79 by dollar for the first time on offshore derivatives platforms amid concerns that higher motor fuel prices will widen the trade gap, though timely central bank interventions on a less volatile trading day helped the local currency defend that level in the spot market. The local drive, however, ended at new record lows.
The dollar continued its rally north against a basket of coins. The dollar’s rise came as concerns about an expanding current account deficit, or an excess of foreign accounts payable over accounts receivable, resurfaced on the penultimate day of the month.
The rupee slipped to a low of 79.06 in the over-the-counter market just after the formal end of trading at 3:30 pm on Wednesday, currency traders said. Even the Clearing Corporation of India trades reported well below the 79 mark.
“We have seen traders close deals at higher exchange rates just after the local market formally closed on Wednesday,” said Kunal Sodhani, executive vice president of Shinhan Bank. “The rupee is likely to extend losses given the current circumstances.”
Throughout the day’s trading, the rupee fell to 78.9850 per dollar in the spot market, according to Bloomberg data compiled by ETIG. It lost 0.23% to close at 78.97.
“Higher oil prices, coupled with an expected hit to the current account deficit, pushed the rupee to another low,” said Ashhish Vaidya, MD of DBS Bank. “Going forward, the rupee’s movement will be determined by a combination of factors: global dollar strength, oil prices and other macro variables.”
The Reserve Bank of India (runs batted in) was seen intervening in the forex market, dealers told ET, particularly in the closing hours of trading. It is estimated that he sold around $700 million to help stem the rupee’s slide, traders said.
