Rupee breaches 72 to the dollar for first time
Photo Credit: Reuters

The Indian rupee breached the 72 to the dollar mark for the first time on Thursday, extending losses as a rout in emerging markets kept investors on edge.

The rupee fell to a record low of 72.11 to the dollar at one point, but pared the day’s losses after mild selling of dollars likely by the Reserve Bank of India, dealers said.

At 0829 GMT, the rupee was trading at 71.9350 to the dollar compared with its previous close of 71.7750.

“This is not intervention, it is just mild selling (of dollars) to smoothen out the volatility and not to protect any level any more,” said a senior forex analyst at a state-run bank.

The rupee has fallen nearly 2 percent this month and more than 12 percent this year, making it Asia’s worst performing currency.

Dealers estimate the RBI on Thursday to have sold about $1 billion, which they said is not much given the pace of the rupee’s fall.

The RBI anonymously intervenes in the forex market through banks, and publishes its forex reserves numbers with a week’s time lag. Typically traders can only estimate the intervention number from the weekly data.

While the sharp fall in the rupee and the RBI’s light-handed approach in the forex market have surprised several traders, government officials have not shown much concern about the currency’s rapid depreciation.

Finance Minister Arun Jaitley said late on Wednesday there was no need for a panicked reaction to the rupee’s fall while the commerce secretary, Anup Wadhawan, said the slide was due to global developments and was helping India’s exports, which rose 14.32 percent in July to $25.77 billion from a year earlier.

“It is quite puzzling to the markets what the government and RBI want on the rupee, and why the government is sending out such signals that they are not worried about the rupee,” said a forex trader at a state-run bank.

The next Fibonacci technical level for the rupee will be 72.50-72.80 to the dollar, the forex analyst said.

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