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The rupee continued its downward spiral on Tuesday breaching past the 64/dollar mark before recovering to 63.23 on RBI intervention.
Though the market focus remained on the dollar, the Indian currency also hit a century against the British pound, closing at a new low of Rs 100.35.
Saying the rupee’s depreciation is impacting investor confidence, global rating agency Standard & Poor's said it will maintain negative outlook for the country.
On Tuesday, the rupee tumbled to a life-time low 64.11/dollar in early trade on heavy capital outflows from the domestic equity market. A forex dealer with a public sector bank said the rupee fell due to lack of inflows and foreign investors pulling out of emerging markets.
According to Mohan Shenoi, President – Group treasury, Kotak Mahindra Bank, “The liquidity tightening measures taken last month by the central bank have artificially linked the interest rates, bond and currency markets. This needs to be de-linked for the rupee to stabilise.”
JP Morgan downgraded India to ‘neutral’ from ‘overweight’ citing strain in balance of payments. This could further weaken the country's sentiment for foreign investors. Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO), said this was a temporary phase and that the rupee will strengthen in the coming months.
“Improvement in overall economic parameters in US and modest growth in Europe in last quarter (after four consecutive contractions) would help India’s exports clock 20 per cent growth from October onwards,” he said.
Exporters should use the rupee depreciation to augment exports by cutting down their prices to out price their competitors, Ahmed added.
beena.parmar@thehindu.co.in
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