Rupee volatile: Currency pares all gains, drops 21 paise to fresh record low of 71.79 on sudden bouts of dollar purchases

Mumbai: The rupee pared initial gains to drop to a fresh all-time low of 71.79 against the US currency, falling 21 paise in late morning deals Wednesday on sudden bouts of dollar-buying by banks and importers. Earlier, the rupee resumed higher at 71.43 against yesterday’s closing level of 71.58 a dollar at the interbank foreign exchange market here. The Indian unit was trading on a volatile note, moving in a wide range quoting between 71.40 and 71.79 during morning deals. The rupee on Tuesday slumped 16 paise against the American unit to trade at a life-time low of 71.37 on strong demand for the US dollar. In its research report ‘Ecowrap’, SBI said given the “inefficacy” of sterilised intervention, RBI may follow a relatively hands-off policy in the forex market for now. [caption id=“attachment_4495585” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] “Rupee’s speculative demand is causing volatility amid crisis in the emerging market currencies and consistent rise in the crude oil prices,” a dealer said. “The rupee has now depreciated by 6.2 percent since June 2018 when RBI started hiking rates. Even as the decline is in consonance with the strengthening of the dollar, we believe it may continue further,” the report said. For example, in August Monthly Bulletin and also in RBI Annual Report, there is a detailed discussion on the costs of continued RBI intervention in the foreign exchange market, said the report. It noted that there has been a spate of RBI communications in recent times which have perhaps gone unnoticed by the market. The dollar strengthened against a basket of currencies overseas as the US economy continued to exhibit strength amid a lingering threat of escalation in the US-China trade conflict, leading to a fall in the domestic unit. Meanwhile, the 30-share BSE Sensex is modestly lower by 29.83 points or 0.08 percent at 38,128.09 at 1100 hrs.