Rupee Hits 20-Month Low of 64.28/Dollar: 10 Developments

The rupee on Thursday broke the psychological 64 per dollar mark for the first time since September 2013. The selloff in the rupee comes at a time when domestic stock markets are under tremendous pressure.

Here are 10 things to know about the rupee selloff:

1) At its day low, the rupee hit 64.28 against the dollar, a 20-month low. It is now on track for a fifth straight day of fall.

2) The weakness in the rupee is being linked to the redemptions by foreign investors, who have sold shares worth $2 billion or around Rs 13,500 crore in the last 14 sessions.


3) FIIs have been selling Indian equites and bonds because of worries about Minimum Alternate Tax demands on capital gains made during previous years, analysts say. "I think the real reason is MAT, which has created a sort of fear in the minds of FIIs," currency expert AV Rajwade told NDTV.

4) The rupee is not the only currency to lose ground. Most emerging Asian currencies fell on Thursday as a global bond rout lifted government bond yields across the region.

5) Traders told Reuters that a uptick in non-deliverable forwards traded in Singapore was hitting sentiment for the local rupee. The one-month NDF was at 64.35/35 versus Wednesday's close of 64.02.

6) India is a net importer and runs a current account deficit, so outflows of dollar tend to put pressure on the rupee.

7) The selloff in the rupee comes after an extended period of outperformance. In 2014, the rupee was the best-performing emerging market currency.

8) The Reserve Bank of India does not target any specific level on the rupee, though it intervenes in the forex market to check volatility.

9) The fall in the rupee could become a political issue. In December 2014, Finance Minister Arun Jaitley was asked to explain the volatility in the rupee in the Rajya Sabha.

10) In July 2013, Prime Minister Narendra Modi had targeted the UPA government for the crisis in the currency. "UPA Government and the Rupee seem to be in a competition with each other on who will tumble down more," PM Modi had tweeted.

Source:profit.ndtv.com