Indian rupee hits record low against the dollar

Avi Krawitz

August 21: The Indian rupee continued its downward spiral this week setting a new record low of 64.11 to the dollar on Tuesday. The currency recovered slightly to trade on Wednesday at 63.4/$1. The decline came despite additional government efforts to narrow its current account deficit and last week increased the import duty on gold from 8 percent to 10 percent.

Asian markets have reacted with caution to expectations that the U.S. Federal Reserve will cut its bond-buying stimulus program that has increased global liquidity in the past few years.

Deutsche Bank said Wednesday that it expects the rupee could touch 70/$1 in the coming month but added that the currency could recover slightly by the end of the year.

August 19: The Indian rupee reached a new record low as it opened for trading today in Mumbai at 62.48 to $1. The currency breached the 62 level for the first time on Friday despite intervention in the foreign exchange markets by the Reserve Bank of India earlier in the week. The weak currency has hampered domestic demand for diamonds and jewelry in India but has helped large manufacturers who are focused on exports. Many in the industry at this past week’s India International Jewellery Show (IIJS) expect the rupee to depreciate even further against the dollar in the second half of 2013.

August 6: India’s rupee sank to a record low of 61.51 to the dollar today despite further efforts by the government to induce currency stability. The rupee fell in early trading on Tuesday indicating that cash-tightening steps taken by the Reserve Bank of India (RBI) over the past month have failed to boost the currency. The rupee’s previous all time low was recorded on July 8 when the currency hit 61.21 to the dollar.

June 26: India’s rupee touched a new record low of nearly 61 to the dollar today and despite government efforts to quell the currency’s plunge. In evening trade, the partially-convertible Indian currency hit a new record low of 60.76, before finally ending at 60.72.

What we saw on the screens was really bad. No level was holding,” said Naveen Mathur from Mumbai’s Angel Broking.

The rupee has dropped 10.8 percent so far this year. Foreign investors have become net sellers of Indian equities, selling $1.39 billion on balance in June after buying stock worth $4 billion in May, regulatory data shows. They have also pulled out $4.8 billion from India’s debt markets in June, partly to take advantage of U.S. yields.

June 10:  The Indian rupee hit a record low on Monday, trading at INR 57.69 to the U.S. dollar as of midday in Mumbai. The currency has depreciated by 4 percent since the beginning of the year and is currently 11.5 percent below its strongest 12-month reading of INR 51.74 to the $1, recorded in October 2012.

A weak rupee helps exporters but places import price pressures the domestic market. The government has been trying to curb imports in an effort to contain the country’s large current account deficit.

Earlier this week, the Finance Ministry raised the duty on gold from 6 percent to 8 percent after domestic demand for the metal surged in May.  Gold imports rose to around 162 tons in May, which was twice the average level. The hike in the duty was the second such increase this year after government raised it from 4 percent to 6 percent in January, a move that was met with criticism from the local jewelry market.

The gold price in rupee terms is down 9.5 percent from a year ago but has increased considerably since mid-May due to the weaker rupee.

Source Rapaport