Here Are Five Major Reasons For Crash In Rupee Today

The Indian rupee ended at 68.79 per dollar on Thursday, after reaching an all time low earlier in the day, reported news agency IANS. Earlier in the day, it touched an all-time low and breached the 69 per dollar mark, due to high crude oil prices and weak macro-economic fundamentals. The home currency recovered from record lows of early morning aided by dollar-selling intervention by the Reserve Bank of India, reported Reuters. The rupee's last record low was 68.87 per dollar, on November 24, 2016. The rupee on Wednesday closed at 68.61 against the US dollar.

Five key reasons for the fall of rupee against the US dollar:

1. Trade war fears: Increasing tensions between the world's two-largest economies -- the US and China -- has kept investors on edge amidst fears of global trade war. "In the near term, the rupee is likely to be under pressure as oil prices continue to remain high, capital outflows from emerging economies continue and trade war tensions keep markets jittery," said HDFC Bank analysts.

2. Increasing oil prices: Higher oil prices also led to a fall in the rupee. "A sharp fall in the rupee is a panic reaction in response to oil price rise and caution by the Reserve Bank of India on the NPA (non-performing assets) situation in banks in its recently released financial stability report," said Deepak Jasani, Head of Retail Research at HDFC Securities. 

3. Emerging markets  exchange rates: It is to be noted that rupee depreciation is in line with emerging market exchange rates, which were largely fed in through dollar strength. A divergence between US dollar appreciation and a moderation in Euro may have amplified the dollar strength, an effect of which reinforced rupee's depreciation, said Anis Chakravarty, partner and lead economist, Deloitte India. 

"Separately, monetary policy announcements by the US Federal Reserve may have further led to investment re-routing with a derived pressure on rupee valuation. In the period ahead, expectations of three rate hikes by Fed this year is likely to define the path that rupee can be expected to take."
 
4. Macro-economic situation: Foreign Institutional Investors (FIIS) have sold over Rs 40,000 crore in debt and equity so far this year. "...A wider current account deficit and continuous outflow from FIIs pushed the currency lower," said Rahul Sharma, Senior Research Analyst at Equity99.

5. Other currencies: Most other Asian currencies also edged down as the trade dispute between the United States and China kept investors on edge. The rupee has shed 7.7 per cent this year, making it the worst performing currency in Asia, followed closely by the Philippine peso.

(With IANS and Reuters inputs)