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Rupee slide: Will it become a senior citizen soon?
22 Jun 2012, 09:07 PM
Saikat Das

Moneycontrol.com

Well, the market is clearly divided on this. The Indian rupee on Friday touched a record low at 57.32 against a US dollar before closing at 57.12. This has again broached a debate over rupee sliding to 60, the age bar to become a senior citizen.

A section of currency experts believe that unless the prevailing negative sentiment turns positive, the freefall will continue. In May, IndusInd Bank's Moses Harding (head of ALCO & economic research) predicted a range of 59.75-60.00 on the back of weak fundamentals and strong USD against major global currencies.

However, State Bank of India's Dr Brinda Jagirdar, general manger (Economic Research) believes, the tumultuous dollar-rupee phenomenon is temporary in nature.

"It does not warrant any movement to 60. It is the skittishness that is getting reflected in the market. Currently, the market is fraught with so many uncertainties. Due to Euro zone crisis, global risk aversion stays dominant in investing sentiment. In such a situation, nobody will lend money to emerging countries," she told Moneycontrol.com.

Owing to the lingering economic crisis in European zone, investors across the world are seeking safety of US dollar backed assets. Accordingly, all major currencies including Euro, Great British Pound (GBP) and others are depreciating against the US greenback. Rupee does not remain insulated and USD too is strengthening against the Indian currency. Since January, rupee fell by 6.4% against USD in 2012. In the last one year, it tumbled by 24%.

Other factors behind INR's sharp decline..

"Presently, a lot of miss-matches are adding to rupee's sharp depreciation," said Pawan Bajaj, general manager, Bank of India.

"A good amount of external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) are maturing. Moreover, exports are slowing due to global crisis. All these lead to higher demand for dollar buying. Unless economic reforms start
 
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