On eve of 72nd Independence Day, Rupee breaches 70 mark against dollar; should you worry?
The Indian rupee's fall continued for the second consecutive day as it touched a fresh all-time low of 70.9 against the US dollar.
The Indian rupee's fall continued for the second consecutive day as it touched a fresh all-time low of 70.9 against the US dollar. On Monday, the rupee ended at an all-time low of 69.93 against the US dollar, mainly on account of negative sentiments due to ongoing Turkey currency crisis.
Rushabh Maru, research analyst at Anand Rathi Shares and Stock Brokers, told news agency PTI that the rupee continued to fall Tuesday because of panic demand from importers.
"Given the uncertainty surrounding Turkey crisis and strength in the dollar index, importers are buying dollars aggressively. The RBI has been intervening very selectively in the market. Hence, an absence of aggressive intervention by the RBI has spooked the market," Maru was quoted as saying.
Economic Affairs Secretary Subhash Chander Garg today said the rupee is falling due to external factors that may ease going forward. He said that there is no need to worry at this stage.
While one expects the rupee slide would come to a halt soon, and there may not be any major worry as Garg says, the continuing fall in the Indian currency does raise some specific apprehensions. Some of them are:
- The falling rupee has complicated RBI's inflation control measures even as the retail inflation fell to a nine-month low of 4.17 per cent in July. The RBI aims to keep the retail inflation at 4 per cent. Weak rupee complicates RBI efforts to check prices as the falling Indian currency makes all imported goods costlier, especially oil. India imports around 80 per cent of its crude oil. High import cost of fuel would have a cascading effect on the domestic market, pushing inflation further up in an election year.
- For those planning to travel abroad, the falling rupee is big bad news. It will be better to wait till the currency stabilises to take a foreign trip.
- Falling rupee is also bad news for companies heavily dependent on imports as their stocks take a bad hit. However, for exporters, falling rupee pushes their revenue in dollar terms. IT and pharma companies are, hence, here to gain. This was reflected on Monday when some IT stocks ended up as the top gainers.