Re hitting 75 a possibility?
The rupee is just 20 paise from 69 and looks all set to hit the mark in Thursday's trade. Can the RBI do anything about it? Well, it tried to stem the fall today, but dollar buying by PSUs at the level of 68.70, though helped the currency get back to above 68 for some time in the afternoon trade, came as no respite as the rupee slipped back again in the late afternoon trade to close the day at a fresh historic low of 68.80 against the greenback, a fall of 225 paise.
"The string of recent policy action might only help to manage the pace of depreciation of the rupee and limit volatility rather than reverse the course of the currency," Singaporean bank DBS said in a note on Wednesday.
The DBS note attributed the fall in Tuesday's session to external triggers and "absence of domestic affirmative action". This is something which cannot be reined in, in a day at least, and given the negative sentiment across the world over rising crude prices, thanks to a possible strike on Syria by the US, the sentiment looks far from improving in the short term.
In fact, the US has categorically said that the problem of falling currencies of EMs is theirs and not of the US, implying that no respite on either QE easing or Syrian strike should be expected from America.
Although it is the whole of Asia that is reeling under the currency crisis, India apparently is most vulnerable; in fact said to be the "worst placed" among the emerging economies as far as the present crisis can be spoken of. "India stands out as the worst performer amongst the Asia Pacific emerging markets in terms of its external situation," said Michael Kurtz, Chief Asia Equity Strategist, Nomura, in an interview with ET Now.
With foreign investors fast fleeing the market, the situation is only to get worse. "The problem in India is that of external funding for the current account deficit which becomes difficult at a time when foreign investors are able to get better yields without having necessarily to go into the emerging markets," Kurtz added.
Foreign investors have sold nearly $1 billion of Indian shares in the eight sessions through last Tuesday, a worrisome prospect given stocks had been the country's one sturdy source of capital inflows, a Reuters report said.
Adding to the woes, passage of Food Security Bill is another big overhang on the rupee. Many analysts see it as a big negative for the fiscal deficit number. Given that several brokerages are bullish on India's long-term story on account of a high probability that fiscal deficit will be tamed, the passage of Food Security Bill can be read as a big bad news, which may be detrimental, if not for the economy in actuality, definitely for the sentiments.
Will the rupee hit 75? No analyst has gone that far, but then such forecasts may not be far given the pace of the plunge of the rupee in the last few days and the fact that RBI could not stem the fall of the rupee in today's trade. "There is not much any country can do about the current situation ... India can't do much about rupee," Jim O'Neill, former chairman of Goldman Sachs AMC told ET Now today, compounding the bearish sentiment cloaking the currency.