One-and-a-half month of respite for rupee was much too long apparently. The Indian currency is expected to come under pressure again, thanks to global factors.
On Thursday, US job data and economic parameters pointed towards a growth trajectory while the policy rate cut in the eurozone confirmed underlining weakness. The developments in the two regions were contrasting but both fed into the dollar gaining strength globally.
The dollar index, as measured against six global currencies, shot up by more than 1% to 81.46 within an hour of these-rate cut and US data- announcements. The euro fell over a percent, from $1.35 to $1.33 levels.
“Euro strength was expected to vanish after the rate cut.
The dollar may continue to gain,” said Abhishek Goenka, Founder & CEO of India Forex Advisors.
The European Central Bank cut its policy rate to a record low of 0.25% from 0.50% in response to falling inflation and extended full liquidity operations till mid-2015.
On the other hand, jobless claims fell in the US. It registered growth of 2.8% in the last quarter. “With improved growth prospects, the chances of tapering as early as December have increased,”said Goenka.
The rupee is widely expected to cross 63 against the dollar. On Thursday, rupee closed at 62.42 per dollar, marginally lower than the previous day’s 62.40 at close. The currency, however, fell to an intraday low of 62.73 per dollar. Traders said that central bank intervention helped rupee recover towards the end of the trade.
“Rupee may open with a gap of 30-40 paise on Friday,” said Sandeep Gonsalves, forex dealer and consultant, Mecklai & Mecklai.
After recovering from all time lows of 68.85 against the greenback in August, the rupee had stabilized to around 61-62 levels in the following months due to various measures undertaken by the government and the Reserve Bank of India (RBI).
These included special swap window for banks to convert their foreign fund raising and foreign currency deposits into rupee resources and direct access for oil marketing companies to cater to their daily foreign exchange needs. However, recent global developments may throw the rupee stability off track.
“RBI intervention and dollar supply from exporters may limit the rupee fall in coming days,” said a forex dealer with a large public sector bank. Also, banks are expected to bring in more dollars, through deposits and overseas fund-raising, in order to take advantage of RBI’s concessional swap window which closes by end of this month.
On Wednesday, the RBI informed that it had received $15 billion since September 10, when the window was introduced.
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