Rupee may dive to 70 level by March, predict experts

With the rupee hitting a record low of 68.86 level intra-day, the market now expects it to slip further to the 70 level by March even though heavy Reserve Bank intervention today saved the day to an extent.
The rupee opened at 68.76, touched a record low of 68.86 before noon, but closed at 68.73 against the US currency as the central bank pumped nearly half a billion worth of dollars to prop it up. The unit had fallen to a lifetime low of 68.85 on August 28, 2013 due to Fed taper tantrums.
"We see the rupee falling to 70 levels by March next year," treasurers at two state-run banks told PTI.

On the market intervention by RBI, another public sector treasurer said, "RBI was seen in the market at various levels. It is likely that they have sold USD 500 million to salvage the currency."
Marketmen said the RBI intervention was seen at 68.84-68.85 levels. However, once the rupee got stable at 68.75-68.76, RBI's presence was not much felt, traders said.
The rupee has been on a downward trend due to continued dollar strength and outflow from overseas investors. Investors are also concerned about the likely impact on growth due to demonetisation.

"FPIs' action is based on Donald Trump's victory as the US President and in anticipation of a hike by the Federal Reserve," Lakshmi Vilas Bank Executive Director N S Venkatesh told PTI.

Bankers termed the current fall in the currency as a "knee-jerk reaction", saying it is more of being event-based.
"It is not the weakness of the rupee, but the strength of the greenback," Federal Bank ED and CFO Ashutosh Khajaria said.
He said investors are also concerned about the impact of demonetisation on the country's growth prospects.
Rating agency Moody's today said demonetisation will have credit implications for every sector of the economy. "In the near term, implementation difficulties will disrupt economic activity, in particular consumption, resulting in temporarily weaker GDP growth. Households and businesses will experience liquidity shortages as cash is taken out of the system," Moody's said.

It further said there will be a loss of wealth for individuals and companies with unreported income, as some will choose not to deposit funds in the formal financial system to avoid disclosing the sources of such funds.