MUMBAI: Is 72 the new normal for Indian rupee? It appears so, if Friday’s currency and market moves are anything to go by. The Reserve Bank of India (RBI)’s invisible hand defending rupee at 72 per US dollar, along with stability in emerging market currencies, helped the domestic unit recover from the carnage.
On Friday, the rupee opened at 71.92 per dollar, touched a low of 72.04 and a high of 71.66 and eventually closed the day (and week) at a modest 71.73.
According to traders, the central bank was back to its fire-fighting mode, intervening aggressively in the forex market, to prevent the rupee from going beyond the psychological 72-mark. This is quite a departure from RBI’s stance so far, when it remained a mute spectator as rupee value got sliced to the bone from 69 to 72 dollar in just 15 trading sessions since mid-August.
Traders said the RBI has likely been selling dollar through both private and state-run banks on the anonymous forex trading platform throughout Friday, underscoring its intent to staunch losses in the rupee, Reuters noted.
Till date, the Indian currency lost over 11 per cent and is notably the worst performing Asian currencies.
Other emerging market currencies too suffered a rout on concerns of higher crude prices, contagion from Argentina and Turkey, besides rising tariff wars. However, on Friday, Asian currencies including that of Indonesia, Philippines and Malaysia strengthened.
Meanwhile, the weakening rupee, which invariably affects the current account deficit, weighed down by higher import bill, is likely to bleed the treasury on account of higher foreign debt servicing. According to SBI Research, India will have to fork out an additional Rs 68,500 crore to repay short-term debt in the coming months.
Hypothetically, if rupee averages 73 to a dollar this year and crude oil, India’s biggest import, averages $76 for the rest of 2018, oil bill will shoot up by Rs 45,700 crore, noted Dr Soumya Kanti Ghosh, Chief Economic Adviser, SBI Research.
Petrol, diesel at record high
Petrol and diesel price were on Friday raised by about 50 paise per litre each. This is the steepest increase in rates since daily price revision came into effect over 14
months ago. A litre of petrol in Delhi now costs Rs 79.99 and Rs 87.39 in Mumbai. Diesel is priced at Rs 72.07 in Delhi and Rs 76.51 a litre in Mumbai. The Oppn has announced nationwide strike next week