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Rupee tumbles below Modi’s age, Congress mocks PM for free fall

30 June 2018
Rupee tumbles below Modi’s age, Congress mocks PM for free fall

The Indian Rupee (INR) has reached a lifetime low against the US Dollar. Though the currency has recovered from this low, it is likely to remain under pressure and fall to fresh lows in the coming days.

In Thursday's trade, the bid-ask spread widened to 1-1.5 paise from the usual 0.05 paise, indicating a (dollar) liquidity crunch in the market.

Brokers said market sentiment was fragile following the rupee hitting a new low of 69.10 against the dollar amid rising crude oil rates. The movement of rupee, since the beginning of this year, has a strong negative co-relation with the crude oil prices.

The partially convertible rupee was trading at a life low of 69.03/04 against the dollar by 0355 GMT.

The website of Foreign Exchange Dealers Association of India showed that Indian Rupee ended 18 paise weaker than the previous close of 68.61 per dollar.

Earlier this month, Urjit Patel, Governor of the Reserve Bank of India, wrote an op-ed in the Financial Times warning that should the USA maintains its current pace of monetary withdrawal it could have serious repercussions for the global economy. It is a usual thing that when exports increase, the price in the domestic market of that particular commodity increase to the extent the prices in the home and foreign markets become equal.

Oil prices could even have an impact on the relatively stable political outlook of India. The WTI crude oil has sky rocketed 12 per cent since Friday after the OPEC meet from around $65 to $73 per barrel.

India's January-March CAD widened to $13.0 billion, or 1.9 per cent of GDP, from $2.6 billion, or 0.4 per cent of GDP, from a year earlier.

India is a large and rapidly growing economy, and also a major oil importer.

And as the free fall of the rupee fuels a number of concern such as the inflationary pressure, current account deficit, the RBI in a general circumstance intervenes either by way of enhanced borrowing tame the free-fall of rupee.

India is the world's fastest-growing large economy in recent quarters, but the continued climb of oil prices could change that, so many investors are lowering their exposure to its currency. "If you look at the second half of this (derivatives) series, macros have worsened a lot, be it the rupee or crude, which has impacted bullish sentiment", said Rahul Sharma, senior research analyst with Equity99, a Mumbai-based investment advisory firm.