Rupee touches all time low following S&P's revision from Stable to Negative.
Source: Business Standard,New Delhi,India.
{For Private use only}
Rupee touches all-time low of 41.19 against dollar following Standard & Poor's revision of long-term India outlook to 'negative' from 'stable'.
Our Banking Bureau in Mumbai
The rupee touched an all-time low of 41.19 against the dollar Monday, reacting to Standard & Poor's revision of its long-term India outlook to 'negative' from 'stable'. Thin trading volumes on account of the strike at State Bank of India's foreign exchange cell in Calcutta also contributed to the rupee's slump.
The government, however, adopted a stoic stance. Finance minister Yashwant Sinha refused to comment on the rupee's depreciation, saying it was a matter within the purview of the central bank - the Reserve Bank of India (RBI).
Yesterday was the first trading day in the forex market after Standard and Poor's announced on Friday that it had revised India's rating. The agency's announcement was made after the markets had closed. "The fall in the rupee's value is a knee-jerk reaction to the change in the outlook," a dealer said.
Further, the strike in State Bank of India's Calcutta office - which houses the foreign exchange cell - meant that the largest forex player in the market was only marginally present and hence unable to even out the market volatility.
The rupee has been under constant pressure ever since the imposition of economic sanctions on India by the US and had touched its previous traded low of 40.80 on May 14, one day after the sanctions were imposed.
The change in S&P's rating outlook exerted further pressure, pushing the Indian currency to a new record traded low of 41.19 against the dollar and a record low close of 40.91-96 Monday. On Friday, the rupee had closed at 40.65/67.
Forward premiums increased across-the-board with the one month closing at 9.32 per cent (5.92 per cent on Friday), the three-month at 8.77 per cent (7.56), the six-month at 9.45 per cent (8.24), and the one-year at 9.22 per cent (8.53).
S&P Monday also revised the outlook on six Indian corporates, namely Power Finance Corp Ltd, National Thermal Power Corp Ltd, Tata Electric Companies, Reliance Industries, Larsen & Toubro and Telco. The outlook on counterparty credit ratings on Industrial Credit and Investment Corporation of India (ICICI), Industrial Development Bank of India (IDBI) and Bank of Baroda were also revised to negative Monday.
The rupee opened at 40.75-85 Monday. Till 10 a m, State Bank of India was quoting a rate of 40.78-80 and it got hit at this level. Market estimates of sales by SBI vary from $30 million to $75 million. Later, SBI had to go off the market because of a bandh call in Calcutta. The Reserve Bank stayed away from the market.
In the wake of demand from corporates and inter-bank play, the rupee then slipped to a low of 41.19. Late in the afternoon, the banks which had gone long liquidated their positions and the rupee gained strength. The RBI's reference rate was 40.92 per dollar against 40.63 on Friday.
There was a good deal of corporate covering and some exporters were also sighted in the market. The rupee is expected to come under further pressure as there are unlikely to be any significant inflows of greenbacks. In fact, during the current financial year, foreign exchange reserves have declined by $701 million by May 15. The bulk of the change can be explained by the $506 million decline in foreign currency assets with the RBI.
|
