The Indian rupee hit its record low of 74.3938, before closing 0.43 per cent higher at 74.3875
Dubai: The Indian rupee continued its losing streak for another session to hit a fresh record low.
The Indian rupee hit its record low of 74.3938, before closing 0.43 per cent higher at 74.3875.
“Rise in crude oil prices above the $84 (Dh309) per barrel mark again and unabated foreign fund outflows weighed on the rupee,” Vijay Valecha, chief market analyst, Century Financial said.
The currency has lost 16.46 per cent of its value, making it the worst performer in Asia. The fall has been attributed to global and domestic cues such as monetary policy tightening in the US, resulting in dollar strength and subsequent withdrawal of foreign portfolio investments. Additionally, the rising price of crude oil, which accounts for more than 30 per cent of India’s imports, and the absence of decisive intervention in the market has been driving down the currency.
A weak trade position accompanied by a bulging current account deficit, the difference between the value of exports and imports, has made the rupee’s position even more precarious.
The current account deficit in the first quarter of 2018 widened to $15.8 billion, around 2.4 per cent of the country’s gross domestic product (GDP), higher than the $15 billion recorded in the corresponding quarter a year before.
“The fiscal and current account deficits have deteriorated as a percentage of gross domestic product, as oil has become more expensive. This has been further exacerbated by the decline in the currency,” Mark Shirreff Matthews, Head Research Asia, Julius Baer said.
The dollar’s ascent has also meant pain for emerging market currencies such as Turkish Lira, Argentine peso, Indonesian rupiah, Brazilian real, among others.
Turkish Lira has shed more than 61 per cent of its value so far in the year, while Argentine peso has shed more than 100 per cent of its value since January 1.