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Fresh rupee scare

Mumbai: There was no respite for the rupee with the currency breaching the 72-mark for the first time on Thursday even as other emerging market currencies came under pressure and worries persisted over the country's current account deficit (CAD).

The domestic currency closed at 71.99 to the dollar - a steep loss of 24 paise after collapsing to 72.11 during intra-day trade.

Forex circles said the Reserve Bank of India (RBI) intervened in the market that helped the currency to recover from the lows, but it was not effective amid the various headwinds that the currency is battling with.

While the central bank has come under the lens for its largely mild interventions so far, experts do not rule out the possibility of the RBI taking other actions.

"The markets are expecting some support from policymakers in terms of a separate window for oil marketing companies (OMCs) and more relaxation on external commercial borrowing (ECB) guidelines. The RBI intervened at various levels but was not very effective to contain the (rupee) movement," said Sajal Gupta, head of forex and rates, Edelweiss Securities Ltd.

The rupee has declined around 13 per cent to the dollar so far this year, while it has fallen five per cent over the past one month.

On Wednesday, finance minister Arun Jailtey tried to assuage concerns when he said the rupee's fall was because of global factors, adding that the domestic unit was better off compared with other currencies.

The rupee has come under pressure because of multiple reasons that include rising crude oil prices, sustained foreign fund outflows, rising trade tensions and widening CAD.

India's CAD (the difference between inflows and outflows of foreign exchange), which was 1.9 per cent in the year ended March 2018, is expected to touch 2.8 per cent in this fiscal, Nomura has forecast recently.

Further, a strong dollar amid adverse news from certain emerging market economies have also hurt the latter's currencies, particularly those running current account deficits.

After a positive start in early trade on Thursday, the rupee breached the 72-mark for the first time. It had opened higher by 13 paise at 71.62 per dollar. But it retreated and touched a record intra-day low of 72.11 in mid-afternoon deals before closing at 71.99.

The intra-day gain in the rupee's value came as the dollar index, which measures the greenback against a basket of other currencies, was a tad weaker.

In cross-currency trade, the rupee tumbled against the pound sterling to 93.08 from 91.95 and dropped against the euro to 83.70 compared with 83.12 on Wednesday. It also fell against the Japanese yen to 64.69 per 100 yen from 64.29.

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