Thursday marked the second consecutive day of the weakening of the Indian Rupee, which fell in value even as the U.S. dollar, as well as the world crude oil prices, descended. Data showed that the domestic currency lost 3 pais against the greenback at 88.66.
This was in dampening mode despite the larger market forces that seemed favourable to the emerging market currencies. The Rupee has appreciated approximately 0.10 in the present month although on the year to date basis, it is ranked second among the worst performing currencies in Asia; it has decreased 3.57.
On Thursday, economic data released showed that the retail inflation in India had softened drastically to record low of 0.25 per cent in October down from 1.44 per cent in September. A high fall of 5% in the prices of food, favourable base effect and the initial advantages of rationalised Goods and Services Tax (GST) structure have contributed to the fall.
Economists are of the opinion that such a steep decline in inflation would allow the Monetary Policy Committee (MPC) of the Reserve Bank of India to contemplate reducing interest rates in their next meeting in December, which would inject more liquidity into the economy and help it to grow.
In the meantime the U.S. dollar index was trading weaker and concerns over a possible government shutdown were eased, dropping 0.20 to 99.29. On the global commodity markets, the price of crude oil markets prolonged their losses in the face of continued selling due to the recent supply prognosis of OPEC. At 3.35 PM IST, the future of the Brent crude was falling by 0.29 percent to $62.53 a barrel, and the U.S. West Texas Intermediate (WTI) crude was declining by 0.31 percent to $58.29 a barrel.
Given the softening of international forces, the traders reported that the movement of the Rupee is still burdened by domestic dollar demand by importers and company outflows whereas the RBI intervention has maintained the volatility. The market participants are waiting on new signals by the inflation expectations and the policies of the RBI.
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