Rupee breaches 67-mark in emerging market meltdown
Rupee breaches 67-mark in emerging market meltdown
The rupee slumped to its lowest levels in over two years on Monday amidst risk aversion in emerging market currencies ahead of a key US Fed policy meeting. The two-day meeting of the US Federal Reserve, which will start on Tuesday is likely to go ahead with an interest rate hike for the first time in nearly a decade.
The rupee breached its psychological 67 level mark against the US dollar and hit an intra-day low of 67.13 per dollar, its lowest level since September 2013. The partially convertible rupee finally closed the day at 67.09 compared to its Friday’s close of 66.88 per dollar.
While the expectation regarding an interest rate hike by the US Federal Reserve is dragging down emerging market currencies, forex dealers said that the Indian rupee has largely priced in the Fed factor and its further movement would depend a lot on the tone of the US Fed’s policy statement. Despite the rupee hitting a fresh two-year low, forex dealers said there wasn’t any kind of panic buying of dollar from importers. “The emerging market currencies are crashing as the dollar is broadly rising against major currencies in anticipation of a rate hike by the US Federal Reserve. The rupee was also adversely hit due to this negative sentiment. However, if we compare our currency with other emerging markets, the rupee has not depreciated as much as others. It has actually limited its fall as the market participants expect the local currency to hit 67.50 per dollar before the US Fed meet,” said Abhishek Goenka, founder and CEO of India Forex Advisors.
If the US Federal Reserve hints about a small and gradual increase in interest rates going forward, Mr Goenka believes that the rupee could bounce back in coming days.
“We didn’t see any panic buying of dollars from importers. The rupee weakness was largely on account of global sentiments favouring the dollar at the moment,” said M.P. Hariprasad, head of treasury at Centrum Broking. He said that the rupee is enjoying good support at 67.20 levels against the dollar and if it breaches those levels, the rupee could hit 67.50 a dollar in the coming days.
