Asian currencies, including the rupee fell almost 1% to 1.22% against the dollar on Monday as fears of tapering began doing the rounds following last week’s US GDP data of 2.8% for third quarter.
The fall was led by the Indonesian rupiah and the Indian rupee, both lost over 1% in a day.
The dollar index, as measured against six major world currencies, rose to two-and-a-half month high of 81.34 before cooling off marginally. The greenback was expected to garner strength after US reported positive GDP rate and a fall in jobless claims last week.
Asian currencies may continue to be under pressure, said forex traders.
“The fear of tapering is back. This is what the Reserve Bank of India had anticipated before taking various measures,” said a senior official at a Mumbai-based public sector bank. The official was referring to the recent steps undertaken by the RBI to attract dollars and guard the rupee from the vagaries of foreign fund outflows if the US Federal Reserve tapers its bond buying program.
On Monday, the rupee ended weaker by 1.22% at 63.23 to the dollar, or 77 paise lower from its previous close.
The Indian currency touched an intraday low of 63.44 per dollar, the level at which RBI was believed to have stepped in traders said.
Rupee had lost 1.22% against the dollar in the entire last week with most of it coming on Friday.
A day ago, the European Central Bank (ECB) had surprisingly cut policy rate to record low of 0.25% thereby feeding into the gaining dollar.
Apart from measures like the swap window for banks and oil marketing companies, the RBI has been actively selling dollars in the spot market too. In September, the RBI net sold $3.5 billion in the spot market as compared to $2.5 billion in the previous month.
The central bank’s concessional swap window has been able to attract $17.5 billion since September, the RBI said Monday.
At this rate, it may touch $25 billion by the end of this month, when the swap window closes, said another senior banker.
This could limit losses for rupee while the dollar demand from oil marketing companies which is being partially diverted to the spot market may play spoilsport.
The rupee had appreciated 1.8% in October and 4.7% in September due to RBI’s measures.
“The fate of rupee depends on how India’s macroeconomic conditions pan out. The concerns on current account deficit may be over but chances of missing the fiscal deficit target remain to be addressed,” said the banker.
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