Indian rupee crashes again; is now 1 fil away from its lifetime low

The beleaguered Indian rupee crashed again this morning (Monday), with the Asian currency hitting Rs15.43 against the UAE dirham at 12.55 UAE time (8.55am GMT), a 2013 low for the Indian currency.

The rupee is now less than Dh0.01 (1 fil, or 15 paise) away from its lifetime low of Rs15.55 that it made in the same month (June) last year, on June 23, 2012.

Sharp losses in Indian equities weighed on the rupee this morning, as did the Reserve Bank of India’s governor’s comments of last Thursday, when he said the country’s persistent current account deficit would continue to keep the rupee depressed in the near term.

Foreign exchange dealers believe that RBI governor D. Subbarao’s comments on Thursday perhaps were meant to dampen down the rupee, and succeeded in doing so quite well, with ripple effects from that and an otherwise dismal balance-of-payments scenario weighing in on the rupee even today, three sessions after the comments were made.

Dealers say Subbarao’s comment on Thursday that inflation still remained high and it will take into account the current account deficit for policy decisions, weighs, as it dampens rate-cut hopes in June policy review.

Analysts have also maintained that an increase in India’s imports bill will keep the rupee weak going forward, thus offering Indian expats in the UAE and across the world a great opportunity to remit their powered-up dirhams, dollars and dinars at close to the most favourable exchange rate ever.

“The Indian rupee weakened further during the week gone by on the back of weakness in the domestic equity markets. Concerns over the wide current account deficit too have been weighing on the rupee. Week-on-week, the US dollar gained 1.59 per cent against the Indian rupee,” Subash Gangadharan, analyst with HDFC Securities, wrote in his latest weekly currency markets report.

“While foreign fund inflows have been supporting the rupee, the rupee is likely to remain under pressure given the increase in imports. However, the easing of the global crude oil prices could support the rupee in the near term,” he wrote. However, countering Gangadharan’s argument was the RBI governor himself, who said on Thursday that, going forward, weak oil prices were not a given.

The daily currency note by Mumbai-based Karvy Stock Broking says the rupee could match its lifetime low as early as today. The research firm expects range-bound trade in today’s session, unless a clear breakout is seen in either direction.

“We expect the pair to trade in a range of 56.70-57.10 [against the US dollar] for the day,” it says. Which works out to between Rs15.43 and Rs15.54 against the UAE dirham. 

“Asian equities are trading down, the dollar is trading weak and the euro is on a flat note. As the day progresses, India’s PMI manufacturing data is due to be releases and is expected to decline, this may limit gains in the rupee,” says the Karvy report.

With the rupee already trading lower this morning, a weak PMI could in fact push it closer to its lifetime low.

“In the afternoon session, Germany and the Euro Zone will release their PMI data, which are likely to improve. These factors should support the euro and pressurise the dollar against the rupee. In the evening session, a few key economic releases from the US are expected. These are expected to decline and may have a negative impact on the dollar. Overall, we expect the rupee to trade in a range against the dollar today,” says the Karvy note.

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