“If the rupee trades at 68-70 per dollar on a sustained basis, it may reduce their absolute EBITDA by 10 per cent to 30 per cent over their FY15 levels”, it said.
The Rupee also fell to 66.64 against the US dollar – the lowest in 23 months. The very next day, that is on Jan 21, in less than a minute into the trading session the lower circuit had been breached. It closed at 66.65, down by 82 paise. Its national currency, the rupee, sank to a two-year low as a result of large scale sell-offs, with investors deeply concerned about contagion from China’s volatile markets. South Africa’s rand is struggling at 14-year lows.
The dollar was available against the Indian rupee at Rs 65.28, the greenback was at 4.1070 in terms of the Malaysian ringgit and the US currency was at 6.3991 in relation to the Chinese yuan. If the rupee continues to fall, prices of imported chocolates, liquors, cheese and Kiwi fruits will go up soon.
Analysts said weak global cues emanating from a continuous slide in the Chinese markets, along with concerns over the stalled domestic economic reforms programme were the main reasons for Monday’s mayhem. Significantly, the yield on the US treasury yield was back above 2%, indicating investors were willing to take on riskier assets. As Finance Minister Arun Jaitley already attributed the reasons for downfall to external factors, here are some external and domestic triggers as well for the downfall. The US unemployment rate is down to such an extent that the Fed is toying with the idea of increasing the bank rate, though it may not yet do it. Indeed, of all the emerging economies, India is in a relatively happy position, least affected by the Chinese contagion. Currency market experts believe that the rupee’s relative over-valuation that has been hurting Indian exports could deter the RBI from protecting a level for the currency. Is it going to raise interest rates?
The World Bank defines Real interest rates as the lending rate adjusted for inflation as measured by the GDP deflator.
The appreciation in rupee value also follows the recovery which was observed on the barometer index of the Indian equity markets. Dealers said the view in the market was that Monday’s 1.3% depreciation was overdone. FII will flock the market again when the economic scenario is better, he added. The Indian markets experienced their biggest one-day fall in about seven years, with the Sensex plunging over 1,600 points.