Rupee tumbles to 1-year low

Dropping to an over 1-year low, the rupee breached 63 levels to end sharply lower (by 60 paise) on Tuesday at 63.54 against the dollar. The domestic currency was weighed down by heavy capital outflows due to negative growth data and global economic concerns amid sharp fall in peer currencies.

The Indian currency had closed at 62.94 on Monday. On Tuesday, it declined to 63.29 to a dollar in opening trade as continued negative sentiments impacted capital flows amid heavy sell-off by foreign investors in the domestic equity markets. The BSE benchmark Sensex collapsed by 538 points (1.97 per cent) to end at 26,780 points.

“Amid weaker domestic growth data and higher non-deliverable forwards, the rupee declined as market investors panicked.

The Russian currency rouble also hit fresh lows against the dollar and the euro,” said a dealer with a public sector bank.

Though the rupee recovered to 63.22 to a dollar in early trade, negative domestic data, including wider trade deficit, major capital outflows and weak industrial output dragged the rupee to its lowest in 13 months at 63.58 to the dollar. In addition, global risks strengthened the dollar and weakened major Asian currencies in the foreign exchange market.

Sugandha Sachdeva, Head-Currency Research, Religare Securities, said factors that fuelled the fall included IIP and trade deficit data, the correction witnessed in domestic equities, anticipation of interest rate hike in early 2015, strengthening US economy, and the upcoming US central bank meeting.

“Meanwhile, oil importers have been buying dollars heavily to benefit from low oil prices as crude continues to drift lower,” he added.

Experts say the rupee may continue to trade with a downward bias towards 64 to 64.30 levels in the near term. As more central banks may join the US Central Bank in its rate hike cycle, there is an expectation that it would result in forex outflows.

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