Indian rupee plunges 27p, hits 70-mark again against US dollar

Indian rupee is continuing to plunge and again breached the 70 mark against US dollar today. Rupee fell 27 paise against the dollar to trade at 70.08 amid strong demand for the American currency after the US Fed released minutes of its policy meet yesterday. The domestic currency opened at a low of 70.03 at the Interbank Foreign Exchange. It was down from its previous close of 69.81, and weakened further to trade at 70.08.
 
Forex dealers said that increased demand for the US currency from importers and its gains against other currencies overseas on expectations of rising US interest rates, has put pressure on the local currency. 
 
Global rating agency Fitch, however, has said the continuing rupee plunge does not pose much risks to India's sovereign rating, as the fall is largely reflective of the shifts in market sentiment towards emerging markets after global monetary tightening.
 
Fitch in a report said, "The impact of the rupee weakness on sovereign credit is limited with relatively strong external finances, especially the low level of external debt which is just 13 per cent of GDP. But this could add to existing pressures in corporate and banking sectors."
 
Last week, the rupee had closed for the first time at 70.15 against the US dollar and many still believe that rupee is still overvalued by at least Rs 2-3 more.
 
Among the emerging-market peers, the rupee has reportedly been the worst hit by global monetary tightening and was also affected by the Turkey crisis. The rupee lost around 9 per cent since January making it the worst-performing major currency in Asia.
 
Key domestic factors that have contributed to the fall is the widening trade deficit, which in July had posted the largest gap since May 2013, PTI report said, adding that the first quarter CAD rose to 1.9 per cent and many believe the gap will be 2.6 per cent of GDP for the full year.
 
With the US economy continuing to grow and the job market strengthening further, many Fed members said that they likely will need to raise the benchmark interest rate again "soon," according to the minutes of the Fed policy meeting early this month.
 
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In early trade today, the BSE benchmark Sensex rallied by 201.88 points, or 0.52 per cent, to quote at an all-time high of 38,487.63, while the broader NSE Nifty breached the 11,600-mark for the first time.