After the initial knee-jerk plunge to 68.21 levels in the early trade due to the Brexit fears (Britain exit from European Union), the rupee recovered to its opening levels at 67.90 levels against the dollar after he RBI soothed the nerves by dollar selling.
Dealers claim that the Reserve Bank of India has supposedly intervened by selling dollars to calm the rupee, which opened sharply weaker by 63 paise to 67.88 from Thursday’s close of 67.25 against the American currency. This is also the rupee’s lowest level since March 1 and biggest intraday fall since August 2015.
At 4.30 pm (local time), the Indian rupee was trading at 67.89. During the day so far, the rupee has traded in the range of 67.78 and 68.21 per dollar.
In the near term, despite the RBI’s support, some analysts expect the rupee to fall further towards historic lows of 68.80 during August 2013.
Hariprasad M. P. Senior Vice President & Head – Treasury, Centrum Direct, said, “There could be some correction going forward but there will be huge volatility as there is uncertainty on the future of UK and other European Union nations. I expect the rupee to breach to all-time low levels and decline to 69-70 in the next quarter.”
Since January this year, the rupee has weakened about 1.63%.
Global analysts predicted that with the UK exiting the now 27-nation European Union, its $2.9 trillion economy is likely to slip into recession.
The RBI has assured that it will take all necessary measures including liquidity to ensure orderly conditions in the financial markets amid an expected surge in volatility in the currency and bond markets.
RBI Governor Raghuram Rajan said, if necessary, the RBI is fully ready to provide adequate liquidity, both dollar and rupee liquidity and that India is less exposed to the external sector than many other countries.
“Indian economy’s good fundamentals, low short term external debt, and sizeable foreign reserves will help India in the days to come…The rupee movement today is moderate as compared to other currencies and is still one of the stable currencies. Do not see substantial outflows from India as of now, “ Rajan commented after the Brexit referendum was completed.
The Great Britain Pound tumbled to its 31-year low crashing more than 9% to 1.33 per dollar, while currencies such as Australian dollar fell over 3.2%, South Korea’s won declined by 2.4% and Malaysia’s ringgit was down 2.3% as Indian rupee was down by over 3.5%. The dollar recovered after it slipped slightly against the yen at 99.02 yen, the first time it has gone below 100 yen since November 2013.
Meanwhile, the yields on the 10-year government bond were jumped to 7.66% from yesterday’s close of 7.48% with the bond price falling to Rs 99.39.