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Last updated: 20 Aug, 2018  

Rupee.9.Thmb.jpg Rupee may recover soon; experts blame geopolitical tensions

Rupee.9.jpg
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SME Times News Bureau | 20 Aug, 2018

The Indian currency which had collapsed to a historic intra-day trading low of 70.40 before closing at fresh lifetime low of 70.15 per dollar on Thursday, will stabilize soon, said a top official on Saturday.

"This breaching of 70 (mark) was on account of external factors largely on what happened in Turkey. Our fundamental equation for the trade has not been changed. Oil prices have not gone up.

"The demand-supply situation for dollars in the Indian economy has not got altered... our perception is that very soon it (rupee) will stabilise and it might go back to Rs 68-69," Union Finance Ministry's Department of Economic Affairs Secretary Subhas Chandra Garg said.

On Thursday, the rupee had touched an all time low of 70.39-40 in the spot market and settled at a record closing low of 70.16 against the greenback.

Speaking on capital outflow, Garg said: "There was an outflow of $9 billion in terms of portfolio investments in the first three months of the current fiscal and last year, we had a inflow of $20 billion. But in July, there was no outflow. In August, there is positive inflow of about $1.5 billion."

Meanwhile, experts viewed that geo-political tensions between US and Turkey, along with fears of a rise in protectionist measures and outflow of foreign funds are expected to mount pressure on the Indian rupee in the coming week.

"Last week was exceptionally volatile, due to Turkish crises and Chinese Yuan devaluation. However, things have calmed down a notch on Friday, due to upcoming dialogue between Chinese and US representatives on trade, to be held in US by end of August," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, said.

"However, S&P has downgraded Turkey to B+ and warned that risk remains elevated for a recession next year as well as hard landing for the financial sector. As a result, we can see renewed pressure on Lira next week. However, RBI intervention may keep the rupee supported. As a result, we expect a range of 69.50-70.50 on spot for the next week."

According to Anand Rathi Shares and Stock Brokers' Research Analyst Rushabh Maru said: "Even though India's CPI and WPI have eased in July, this is just a temporary phase. Sharp depreciation in the rupee and higher crude oil prices may once again push inflation higher. The US dollar index is trading around multi-month high levels."

 
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