Indian currency seen 10% overvalued based on real effective exchange rate; Sensex drops to 5-month low as foreign investors satiate appetite elsewhere

The weakness in the equity markets percolated to the currency market as the rupee breached the psychological 64 per dollar mark for the first time since September 2013 on Thursday.

The central bank intervened in the foreign exchange market but that was not enough to curb the fall as the currency ended the day at 64.24 per dollar compared with the previous close of 63.54, a drop of 1.10 per cent or 70 paise.

Thursday’s fall in the rupee — whose performance was the worst among major currencies – was the steepest since January 24, 2014 when it had ended at 62.69 a dollar, recording depreciation of 1.21 per cent or 75 paise. (CURRENIES AGAINST THE US DOLLAR)

Even though the currency has weakened by 2.8 per cent against the dollar since end-March, market participants say more correction is due and the currency could touch the 65 per dollar mark.

“Right now everybody in the world is terrified, due to which they are selling everything, as a result of which the rupee has gone down,” said Jamal Mecklai, CEO, Mecklai Financial Services. “People are going to remain nervous for a while. I think the rupee is going to remain under pressure. But the RBI will try to prevent the rupee from falling too much more. I don’t think the rupee will fall beyond 65.50 in the near term.”

For more visit: Business Standard

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