Rupee falls to fresh all-time low of 70.08 level on Turkish crisis

The rupee continued its free fall in early trade today and hit a fresh all-time low of 70.08 level to the dollar as Turkey's central bank struggled to contain a currency crisis that is feeding fears about other emerging markets. The rupee is down nearly 10% in 2018 and has fallen 2.4% or Rs 1.64 since the beginning of this month.

"The rupee is mainly impacted by fall in Turkish Lira," said a treasurer of a state-owned bank.

Lack of FII inflows and growing oil prices are also affecting the rupee, a PSU bank official said. Foreign investors sold shares worth Rs 971.8 crore on a net basis, provisional exchange data showed.

Rushabh Maru, Research Analyst at Anand Rathi Shares and Stock Brokers, said the rupee extended losses today on account of panic demand from importers.

"Given the uncertainty surrounding Turkey crisis and strength in the dollar index, importers are buying dollars aggressively. The RBI has been intervening very selectively in the market. Hence, an absence of aggressive intervention by the RBI has spooked the market," he said.

Meanwhile, the government blamed "external factors" for the rupee's fall and said there is nothing to worry. Economic Affairs Secretary Subhash Chander Garg said external factors may ease going forward.

"Rupee is depreciating due to external factors," he said. There is "nothing at this stage to worry".

"After remaining stable for a prolonged period, INR has depreciated in line with other emerging market currencies in the last few months. This is absolutely normal in a generalised US$ appreciation environment. There is no reason to be alarmed as India's fundamentals remain robust and external sector ratios are quite comfortable," said Manish Gunwani, CIO-Equity Investments, Reliance Nippon Asset Management.

Dhananjay Sinha, head of institutional research at Emkay Global Financial Services said, "In our view, the rupee was overvalued. We had taken a view that the rupee would cross 70 versus the dollar, and the fall in other EM currencies has just exacerbated the fall."

On Monday, the currency crashed by a mammoth 110 paise-its biggest single-day fall in five years-to end at a lifetime low of 69.93 as the US dollar gained rapid strength amid fears that economic crisis in Turkey could spread to other global economies.

Deepak Jasani, Head, Retail Research at HDFC Securities said, "The  Indian  rupee  on Tuesday extended  its  fall  and  breached  the psychological  70  level for the first time vs the USD hitting an intra day low of 70.08. This  fall over the last few days was caused by jitters in emerging  market countries post the Turkish Lira falling sharply due to its economic crisis. This comes at a time when the developed economies have started to  unwind the monetary stimulus creating fears of tightening liquidity and volatility in the currencies of emerging markets. However, the fact that Turkish Lira has recovered sharply on Tuesday by 5% may  ease  the  pressure on the Rupee. In addition, soft CPI number for July 2018  will  also  help  easing  fears  of  continued  rate hike by the RBI."

Turkey's central bank announced measures to help its banks, but the country's Lira and stock market slid further. The Lira has tumbled as investors question whether President Recep Tayyip Erdogan's government can cope with problems including the weakening currency and a diplomatic spat with Washington that has resulted in higher US tariffs.

Meanwhile, the Sensex was trading 150 points higher at 37,795 points and Nifty was up 50 points to 11,404 level.

The Shanghai Composite Index fell 0.5 percent to 2,771.81 and Hong Kong's Hang Seng lost 0.9 percent to 27,686. Tokyo's Nikkei 225 gained 1.8 percent to 22,255 and Seoul's Kospi added 0.4 percent to 2,257 Sydney's S&P-ASX 200 advanced 0.8 percent to 6,298. Benchmarks in Taiwan and New Zealand improved while Singapore, Indonesia and Thailand declined.

A stronger dollar hurt exporters, whose goods will get more expensive abroad. Most retailers were down, but Amazon advanced 0.5 percent. The Standard & Poor's 500 index lost 0.4 percent to 2,821.93. The Dow Jones Industrial Average slid 0.5 percent, to 25,187.70. The Nasdaq composite fell 0.2 percent to 7,819.71.

Written and edited by Aseem Thapliyal