Back to 55 against $: Why the rupee is worst performer globally

Amid re-ignited concerns over the macro-economic scenario in India and globally, the rupee has again slipped below the 55-level against dollar, the largest fall among its major peers globally in the past 30 days.

As against the US dollar, the rupee has sharply fallen from 52.88 levels one month ago to 55.16 on Friday, marking a drop of over 4.2 percent. This is the largest fall vis-a-vis the US dollar in the past one month among 25 major currencies across Asia, Americas, Europe, Middle East and Africa.

The rupee had closed at its life-time low of 57.12 against the US dollar on June 22 this year. In February, rupee had strengthened to as high as Rs 49.

In an interview to CNBC-TV18, Ashish Vaidya, UBS AG said in the short-term, rupee may not breach 55.46-55.50. "We will have to wait for the winter session of parliament. There is also expectation on GAAR. So, there could be some positive vibes," he added.

Flickr/Andrew Middleton

Recent economic data like exports, imports, balance of payments and deficit has been bad.

Gautam Chhaocharia, Head-India Small/Mid-cap Research, UBS, in an interview with ET Now, said the continued negative surprise on the trade balance front has not yet improved as per initial expectations.

There also have been intermittent withdrawals by the FIIs in the stock market. "Also the recent worries over US economy have also not helped the rupee's cause. A combination of these factors has dragged down our currency," Dhanlaxmi Bank Executive Vice-President (Treasury) Srinivasa Raghavan said.

Analysts also feel there has been an increase in speculative activity in the NDF (Non-Deliverable Forward) forex segment. NDF market is an offshore market to trade and hedge in currencies like the rupee (which are not fully convertible)

and many institutions are betting on a further fall, said the head of treasury at a nationalised bank.

Within Asia, the steep depreciation of rupee is followed by the Japanese Yen, which has dropped around 2.9 per cent in the past one month. Among other Asian currencies, Singapore dollar has slipped 0.66 per cent, Malaysia's Ringgit by 0.6 percent and Indonesia's Rupiah by 0.42 percent. On the other hand, China's Yuan has gained 0.45 per cent against the US dollar, while Australia's dollar has also appreciated by 0.37 percent in the same period.

Forex experts are divided over the rupee's future with some seeing respite in the short-term. "The rupee could face the resistance at 55.25 levels," India Forex Advisors' Founder and CEO Abhishek Goenka said.

Others feel things could get worse for the rupee. "For currency, our view is that it is into impulse of falling trend and it will reverse the direction if it breaks the level of 48. Till then we may expect range bound activity between 51 and 56. If it breaks 58 then on the higher side it may jump to 61 levels," Kotak Securities' Technical Research Head Shrikant Chouhan said.

A falling rupee makes crude oil and fertilisers, which India imports in large quantities, costlier and consequently hit the overall economic health of the country.

With inputs from Agencies

Updated Date: Dec 20, 2014 14:12 PM

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