Business: Jun 22, 2012

Well, the market is clearly divided on this. The Indian rupee on Friday touched a record low at 57.32 against the U.S. dollar before closing at 57.12. This was again broached debate over rupee slipping to 60, the age bar to become a senior citizen.

Section of currency experts believe that if the prevailing negative sentiment is positive, the freefall will continue. In May, IndusInd Bank Moses Harding (head of ALCO & economic research) predicted a range of 59.75-60.00 on the back of weak foundations and strong USD against major global currencies.

However, State Bank of India 's Dr Brinda Jagirdar, general manger (Economic Research) believes the troubled dollar-rupee phenomenon is temporary in nature.

"It does not justify any move to 60. It is the skittishness that use reflected in the market. Today the market is loaded with so much uncertainty. Due to Euro crisis, global risk aversion remains dominant in reverse sense. In such a situation, no one lend money to emerging countries, "she told Moneycontrol.com.

Because of the lingering economic crisis in the European area, investors around the world in search of safety of U.S. dollar assets. Accordingly, all major currencies including the Euro, Great Britain Pound (GBP) and others are depreciating against the U.S. greenback. Rupee is not isolated and USD too is strengthening against the Indian currency.

Other factors behind the sharp decline INR ..

"Presently, a lot of miss-matches are often added to the sharp rupee depreciation," said Pawan Bajaj, managing director, Bank of India.

"A good amount of external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) are mature. Furthermore, exports are slowing due to global crisis. All these lead to higher demand for dollar buying. If economic reforms begin to take place, the negative sentiment continues climb. In the near future, rupee fall below 50. "

In the absence of reform measures by the government, foreign investors are shying away from Indian markets, which in turn, squeeze dollar sources in the country. In FY13 to date, foreign institutional investors (FIIs) have net sold over Rs 2,986 crore in Indian equities.

Meanwhile, oil prices went down. It fell below USD 90 a barrel for the first time since December, 2010. However, the rupee depreciation is erased gains keeping imports costlier. Therefore, the yawning current account deficit continues to hurt the economy imposes foreign exchange.

"It seems that Rupee touch Rs 60. Less dollar flows, a high rate of inflation and global risk aversion makes a case for further rupee fall. Seems rupee is on its way to a new normal level," said Hariprasad MP, head - treasury, CentrumDirect, a Mumbai-based brokerage.

Change: India vs. other SAARC nations

The dollar exchange rates of other members of the South Asian Association for Regional Cooperation (SAARC) is much lower than the Indian rupee. In Sri Lanka rupee is at around $ 132.68/US, Pakistani rupee at 93.35/US $, Nepal rupee at 84/US $ and Bangladeshi Taka at 80.43/US $.

"We did not get a situation where we have to conclude that 55 or 60 is the new normal level. India economy is far ahead of other SAARC nations. Once foundations are back on track, rupee may bounce back to the 45-48 level in a year time," said senior manager (currency) of private sector bank.

Business

Friday, June 22, 2012

Rupee slide: Will it become a senior citizen soon

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