INSUBCONTINENT EXCLUSIVE:
The rupee is in severe pain, sowing seeds of fear among stock market participants
It has already crashed to a fresh record low of 69.85 levels and is in a spot of worry
Its fortunes started to sink on Monday, in line with other emerging market currencies
And that followed Turkish lira plunging to an all-time low amid worries over a growing diplomatic rift with the United States
So much so that the local currency hurtled to its fresh lifetime low of 69.86, down Rs 1.02 at one point.
The stock market is visibly tense
Domestic stock markets were in the red, reflecting a weak rupee as well as subdued global cues
The US stocks declined on Friday as a deepening economic crisis in Turkey pushed down bank shares and triggered an exit out of riskier
Tushar Arora, Senior Economist, HDFC Bank, told ET Now that if the rupee crosses the 70 mark, then a lot of outflows are triggered
"It triggers a risk-off sentiment in general leading to a lot of capital outflows
That is something which needs to be protected," he added.
Many experts believe that the spillover effect of Turkey on Asian countries is
importantly, the indirect spillover into the euro as well
There are concerns that some European banks have exposure to Turkey and that will be reflected in balance sheets and PL of some of these
The euro has weakened quite sharply on the back of breaking the 114 level, which has been quite a key technical level, and the genesis of
attendant negative sentiment that is percolating into Asia
That is the main reason why the rupee has broken the key 69 level and is trading at 69.5
The direct spillover effects from Turkey to Asia at this stage are somewhat limited
A slump in the Turkish lira worsened after US President Donald Trump doubled tariffs on steel and aluminum imports from Turkey
think that there is a contagion effect from Turkey to Asia, but certainly the indirect true sentiment, true wider euro weakness definitely
is unlikely to be resolved any time soon
An absence of aggressive intervention by the RBI has also hurt the rupee."
According to Credit Suisse, though the Reserve Bank is not likely
to go for another rate hike this year, but if rupee continues to depreciate to around 70, it is likely that the RBI may try to arrest
weakness in the rupee with another rate hike.
On technical front, a sustained break above 69.00 should signify a break for a move towards
