Wednesday, August 21, 2013

Rupee breaches 65 per dollar to record low, Nifty sinks below 5300

The Indian rupee breached the 65 mark against the dollar on Thursday surpassing the previous all-time low of 64.55 hit just yesterday. The partially convertible rupee fell over 1.5 per cent to a low of 65.12 against Wednesday's close of 64.11.

Markets tracked the rupee, opening lower for the 5th consecutive session. The 50-share Nifty slipped below the key 5,300 levels in early trades, but recovered as the rupee pulled back from the day's low.

The BSE Sensex traded around 50 points higher, while the rupee traded at 64.90 to the dollar as of 10.10 a.m.
The rupee weakened tracking the strength in the dollar index, which measures the greenback versus a basket of six currencies. The dollar index rose to 81.422, from a low of 80.896.

Fresh weakness in the rupee comes after minutes from the Federal Reserve's July policy meeting showed the U.S. central bank was on track to start tapering stimulus as early as next month.

Top officials of the Fed were mostly in agreement that the central bank should end its massive bond-buying program, which has been in place in one form or another since late 2008 to keep interest rates low and encourage economic growth.

A Deutsche Bank report on Wednesday had predicted the rupee's slide all the way to 70 in a month or so. (Read: Rupee staring at 70?)

The Reserve Bank of India has proven unable to stem the rupee's selloff, despite intervention and curbs on outflows from companies and individuals, which have dented India's stock and bond markets. The government continues with incremental steps, banning duty-free import of flat-screen televisions.

The RBI's announcement on Tuesday to reverse its tightening strategy and start buying bonds has further confused traders.

"In our view, the problem is that the RBI is trying to juggle too many balls, which sends confusing signals and damages its credibility," Nomura said in a report on Wednesday.

However, Arvind Narayanan of DBS bank told NDTV that it is unfair to blame the Reserve Bank.


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