Rupee breaches 69.80 against US dollar, 70 ‘now in sight’

The rupee has weakened over 7.5% so far this year. The rupee fell to a new life-time low of 69.80 against US dollar today.

New Delhi: The Indian rupee (INR) today nosedived to a record low against US dollar (USD) amid, tracking losses in emerging-market currencies on continued turmoil in Turkey. The rupee fell to a new life-time low of 69.80 against US dollar, tumbling 96 paise. On Friday, the rupee had closed at 68.84 against the US dollar. Investors rushed to safe-havens such as the US dollar and the yen after a plunge in the Turkish Lira sent all emerging market currencies sharply lower. At 3 pm, the rupee was trading at 69.79 against the US dollar. The Sensex also fell sharply, plunging over 250 points.

Here are 10 things to know about rupee’s plunge today:

1) The Turkish lira has fallen about 45% against the greenback this year on worriesover Turkish President Tayyip Erdogan’s increasing control of the economy and a deepening diplomatic rift with the US.

2) In a note forex advisory firm IFA Global said, “The psychological 70 mark is now in sight.”

3) In the wake of weakness across the board, “the RBI may be less keen to intervene. It may do so just to curb volatility and desist speculators,” IFA Global added.

4) The decline in the lira “may fuel volatility in emerging-market assets and dampen investor sentiment in the near term, as markets are already skittish,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

5) The JPMorgan analyst however said that the “drivers of the lira’s decline are very specific to Turkey. Therefore it should not derail the positive fundamentals in other emerging markets over a longer-term.”

6) Another key data point to be watched today is retail consumer inflation data for July due after market hours. A Reuters poll estimates July inflation of 4.51% compared with a 5-month high of 5% hit in the previous month.

7) The Sensex plunged today by over 300 points at day’s low, tracking a selloff in other equity markets. The benchmark index was down about 250 points at day’s low.

8) IT stocks however gained today, with NSE IT index up over 1%. Tech Mahindra, Infosys and HCL Tech were among the top gainers. A weak rupee boosts the rupee earnings of IT companies.

9) Turkey’s central bank today said it was ready to take “all necessary measures” to ensure financial stability after the collapse of the lira. The statement came after the Turkish lira hit record lows against the dollar amid a widening diplomatic spat with the United States.

10) The detention of US pastor Andrew Brunson since October 2016 on terrorism charges has sparked the most severe crisis in ties between the two NATO allies in years. The Turkish central bank has defied pressure to hike interest rates which economists said would curb the fall of the lira. Turkish President on Saturday called interest rates as “tool of exploitation” that makes the poor poorer and the rich richer.

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