Rupee at all-time low: What is pushing it down? HSBC India answers

Rupee breaches 69 per dollar for the first time may lead to high inflation worsen current account deficit

Rupee at all-time low: What is pushing it down? HSBC India answers

The Indian Rupee (INR) on Thursday plunged at a further all-time low against the USA dollar at 68.89 per dollar, after it closed at 68.61 on Wednesday.

The partially convertible rupee was trading at 68.93/94 to the dollar at 0802 GMT, after hitting a life low of 69.0950 earlier in the session, and sharply lower than its previous close of 68.65/66.

Subsequently, the fall in oil prices from $72 to $64 on expectations that the Organization of Petroleum Exporting Countries (OPEC) will increase production gave a breather to the Indian rupee.

Indian Bank dropped as much as 4.3 percent after it withdrew dividend payment plan of 6 rupees per share. From witty one-liners to sarcastic tweets, it did not take long for Twitterati to turn the news around. Higher crude oil prices and a declining rupee are a double whammy for India, forex dealers said.

A growing number of emerging markets are coming under pressure from the same forces.

The rupee has shed 7.7 percent so far this year at its record low, making it the worst performing currency in Asia, followed closely by the Philippine peso. -China trade row kept financial markets on edge.

"Several reasons are contributing to the rupee slide - fear of the USA sanctions and tariff wars, the increasing trade gap, and FIIs pulling out owing to demand for dollars", Guruswamy said.

Every $10 rise in the oil price worsens India's current-account balance by 0.4 percent of gross domestic product, and pushes up inflation by 30-40 basis points, according to Nomura Holdings Inc.

The volatility is being driven by global factors, including proposed USA sanctions on Iran and the mismatch in demand and supply of oil, said Subhash Chandra Garg, the economic affairs secretary in the finance ministry.

The Reserve Bank of India, the country's central bank, is finding it tough to contain the falling rupee.

The January-March current account deficit widened to $13.0 billion, or 1.9 per cent of GDP, from $2.6 billion, or 0.4 per cent of GDP, a year earlier.

"The fall in the rupee was led by higher oil prices and rising trade war tensions between United States and China".

India's vulnerability is also underscored by its dependence on imports for oil.

Crude oil prices are at the highest levels since 2014 as production has declined.

"The rupee weakened past 69 to a record low on Thursday". Foreign portfolio investors have pulled out more than Rs 46,600 crore from the capital markets (equity and debt) in the year so far.

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