MUMBAI: The rupee closed at a new low of 77. 84 on Friday, ending a week of daily declines against the US dollar. The local currency has lost 21 paise against the dollar during the week, dropping a few paise every day.
On Friday, the rupee came under pressure following a selloff in the equity markets even as the dollar gained against major currencies. The domestic currency opened at 77. 81 and was traded at an intraday low of 77. 93 before firming up.
Dealers said that the India basket of crude oil hit $121 per barrel as against the average price of $105 factored in by the RBI while drawing up its macroeconomic projections. Dealers said that besides crude oil prices, high capital outflows from the equity markets were keeping the rupee under pressure.
According to a report by Moody’s Investor Services, the companies the agency rates (mostly large corporates) have buffers to withstand a further 10-15% depreciation of the rupee. “Most rated companies have protections to limit the effect of currency fluctuations. These include natural hedges in the form of revenue and costs denominated in or linked to the dollar, some dollar revenue, financial hedges, or a combination of these factors, which help limit the adverse effects on cash flow and leverage, even in the event of a more severe weakening of the rupee,” said Annalisa Di Chiara, a Moody’s senior vice-president.
With US inflation coming in higher-than-expected late in the evening, there are fears that markets might again witness selling as funds turn risk-averse.
“We expect the rupee to weaken in the coming months. If this continues, the rupee is expected to be range-bound between 77. 5 and 78. 25,” said Manoj Dalmia, founder and director, Proficient Equities.
On Friday, the rupee came under pressure following a selloff in the equity markets even as the dollar gained against major currencies. The domestic currency opened at 77. 81 and was traded at an intraday low of 77. 93 before firming up.
Dealers said that the India basket of crude oil hit $121 per barrel as against the average price of $105 factored in by the RBI while drawing up its macroeconomic projections. Dealers said that besides crude oil prices, high capital outflows from the equity markets were keeping the rupee under pressure.
According to a report by Moody’s Investor Services, the companies the agency rates (mostly large corporates) have buffers to withstand a further 10-15% depreciation of the rupee. “Most rated companies have protections to limit the effect of currency fluctuations. These include natural hedges in the form of revenue and costs denominated in or linked to the dollar, some dollar revenue, financial hedges, or a combination of these factors, which help limit the adverse effects on cash flow and leverage, even in the event of a more severe weakening of the rupee,” said Annalisa Di Chiara, a Moody’s senior vice-president.
With US inflation coming in higher-than-expected late in the evening, there are fears that markets might again witness selling as funds turn risk-averse.
“We expect the rupee to weaken in the coming months. If this continues, the rupee is expected to be range-bound between 77. 5 and 78. 25,” said Manoj Dalmia, founder and director, Proficient Equities.
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