Re closes below 80/USD for 1st time amid deficit worries

New Delhi, July 20

The Indian rupee fell 13 paise on Wednesday to close below the 80 mark for the first time against the US dollar due to a strong demand for the greenback amid high crude oil prices. At the interbank foreign exchange market, the rupee opened at 79.91 and settled at the day’s low level of 80.05 on close.

Reasons for decline

• Significant demand for the US dollar among oil importers
• The Russia-Ukraine war crisis and firm crude oil prices
• Concerns about swelling trade deficit, fiscal tightening

Fares better vs £, ^

• Rupee has slid from 74.17 per dollar in January to 80
• The Euro, which stood at Rs 84 in Jan, is worth Rs 82 now
• The British pound, worth Rs 101 earlier, is now at Rs 96

Forex reserves at $580.2 bn, down $27.05 bn from March

On Monday and Tuesday, the rupee had dipped below 80 during mid-session but had recovered against the US dollar due to forex inflows and possible RBI intervention. Forex traders said significant dollar demand from oil importers, firm crude oil prices as well as concerns about swelling trade deficit weighed on investor sentiments. Foreign institutional investors were the net buyers, purchasing shares worth Rs 976.40 crore. India’s forex reserves stood at $580.252 billion last Friday, a drawdown of $27.05 billion since March-end. Chief Economic Adviser V Anantha Nageswaran said the yen and the pound had depreciated much more against the dollar. “The RBI has announced liberalised rules to attract inflows. We have also raised the import duty on gold. Whenever the Federal Reserve is on an aggressive tightening, this type of reaction happens. This time it is far more moderate,” said Nageswaran. Union Finance Minister Nirmala Sitharaman had said on Monday that the rupee was depreciating against the dollar largely due to global factors such as the Ukraine crisis, high crude prices and fiscal tightening.

The latter reason has led to foreign portfolio investors withdrawing $14 billion from the equity markets and investing the amount in advanced economies where interest rates have been going up.

Congress takes jibe at government

Modi ji made falling rupee a poll issue in 2014…. blamed the then ‘weak’ (UPA) govt… but what’s the strong govt giving us now? —Shashi Tharoor, Congress MP