Union Finance Minister Pranab Mukherjee told reporters on Wednesday the rupee’s slide was unlikely to change till things stabilised in the euro zone, the world’s largest trading bloc.
Analysts said the rupee would further depreciate against the dollar as investors switched to the latter in the euro zone and also due to problems on the balance of payments (BoP) front in India. The Indian currency fell to all time low in on Wednesday’s trade, at 52.36 against a dollar, even after the Reserve Bank sold dollars.
The euro zone, however, continued to show a deceleration in manufacturing output. Advance data from there for the widely tracked Purchasing Managers Index (PMI) showed a decline in the manufacturing index to 45.8 points in November, the fourth monthly fall in a row and the lowest reading since June 2009. Any PMI reading above 50 points indicates growth; below that level, contraction.
Services activity in the euro zone also fell, for the third month, though the rate of decline eased slightly compared with October. The Flash (advance) PMI was 47.8 points in November against 46.4 in the previous month.
Germany, hitherto an exception in the otherwise dismal performance in the euro zone, saw a greater downturn in manufacturing. The Flash Manufacturing PMI there fell to 47.9 points from 49.1 in October. This November PMI is a 28-month low in Germany.
France also saw manufacturing contracting at a greater momentum. However, the services sector rose slightly in Germany; in France, the pace of services contraction moderated.
“It (the rupee) will continue to depreciate further, maybe to 55 or 60, as there is no positive sign seen in either balance of payments or the euro-dollar pair,” CARE Ratings Chief Economist Madan Sabnavis told Business Standard.
The dollar is strengthening against the euro and will strengthen further, which is creating pressure on the rupee, analysts said.