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Rupee touches 65/$; fall on expected lines, say experts

The rupee depreciated 0.36 percent to touch 65 to a dollar against yesterday’s closing of 64.77.

The rupee depreciated 0.36 percent on Thursday to touch 65 to a dollar, a level last seen on September 6, 2013. The rupee started to weaken since PBOC devalued yuan a couple of days ago although it (INR) had opened marginally higher at 64.72 per dollar against Wednesday’s closing of 64.77.

Ashutosh Khajuria of Federal Bank says the fundamentals suggest the real effective exchange rate can depreciate by at least five to six percent, going by how the inflation has shaped out vis-à-vis the US inflation. He sees 65.20 as a strong resistance. 

Competitive economies like China, Thailand, Malaysia will find scope for three to four percent depreciation. So, breaching 65 per dollar may be a physiological number but it is not going to hurt the trade. Only thing is if it would have happened smoothly in stages say ten to twenty paisa a day it would have been well absorbed by the economy, he said.

Meanwhile, Ashutosh Raina of HDFC Bank doubts that the RBI had stepped in today to stem the rupee fall. “If there has been intervention we could have seen much lower level. It is market dynamic at the moment that worked today.”

Khoon Goh, Senior FX Strategist, ANZ Research believes the rupee was catching up a bit after staying behind other Asian currencies on Tuesday and Wednesday. He thinks factors like dissapointing conclusion of Monsoon Session and the RBI external advisor comment suggesting the rupee needs to be adjusted downwards added fire to the fuel.

Analysing the depreciation, Mohan Shenoi of Kotak Mahindra Bank said, “The devaluation of yuan on the back of weak exports from China has resulted in unwinding of yuan carry trades in particular against the euro. Asian currencies have come under pressure due to yuan depreciation.”

“In response, rupee will also depreciate but gradually in a calibrated manner. The USD-INR is expected to trade today in a range of 64.60-65.10/dollar,” he added.

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