Rupee again breaches 72-mark, down 81 paise in early trade despite govt measures to stem steep fall in Indian currency

Mumbai:: The rupee depreciated 81 paise to 72.65 against the dollar in early trade on Monday at the forex market, despite the government’s steps to stem a steep fall in the currency, amid reports that the US could announce a new round of tariffs on Chinese imports later in the day. The dollar rose against a basket of major currencies overseas, with investors cautiously awaiting news on the implementation of US tariffs on an additional USD 200 billion of Chinese imports, forex dealers said. On Friday, the rupee had gained 34 paise to close at a one-week high of 71.84 against the US dollar on positive macro data and hopes of policy intervention by the government to defend the volatile currency. The government on Friday announced an array of steps, including removal of withholding tax on Masala bonds, relaxation for FPIs, and curbs on non-essential imports, to contain the widening CAD and check the rupee fall. [caption id=“attachment_5114261” align=“alignleft” width=“380”]  Rupee and US dollar Representational image. Reuters.[/caption] The decisions were taken at a meeting chaired by Prime Minister Narendra Modi to review the prevailing economic issues. Modi was briefed by RBI Governor Urjit Patel, and top officials of the finance ministry on the health of the economy. These measures are likely to have a positive impact to the tune of $8-10 billion, a top finance ministry official said. Briefing media after the meeting, Finance Minister Arun Jaitley said the government has decided on “five steps” to contain CAD, which widened to 2.4 percent of the GDP in the first quarter of 2018-19. Moody’s said the rupee’s depreciation may be credit negative for companies having dollar-based debt, resulting in markets reacting negatively in the early part of the week. Meanwhile, the government’s rupee depreciation arresting measures announced on Friday may not drive fund inflows and are a negative from a longer term perspective as they increase short term debt, a HDFC Bank report has said. “Considering that most of the measures aim at increasing short-term external debt or in effect worsen the risk profile of companies (by increasing un-hedged exposure), could actually be considered negative,” the note released Saturday by one of the largest private sector lenders said. Meanwhile, the benchmark BSE Sensex tumbled by 295.40 points or 0.78 per cent to trade below the 38,000 mark at 37,795.24 in early trade. -- With agency inputs