NEW DELHI : The rupee weakened for the fifth consecutive session as it breached the 71.50 a dollar mark on Tuesday on concerns over worsening macroeconomic parameters amid rise in oil prices.

After closing 71.21 a dollar on Monday, the currency opened marginally lower at 71.24 a dollar and weakened to hit a new low during the end of the trading session. The rupee closed at 71.58 a dollar, which was a record closing low.
The rupee, which has depreciated by 11.5% so far, is the worst performing currency in Asia this year. The yield on 10-year benchmark government bond inched up 6 bps to close at 8.06%.

With the Reserve of India (RBI) not seen intervening aggressively to curb the rupee fall, there is speculation about interest rate hikes to halt the depreciation. “RBI intervention is very less despite the fact that forex reserves are around $400 billion. There are talks of out-of-the-monetary-policy interest rate hike by the RBI and issuance of NRI bond issue to raise dollar money,” said Rushabh Maru — research analyst, Anand Rathi Shares and Stock Brokers.

The rupee has depreciated over 6% since June, that is, when the central bank started raising interest rates. A report by State Bank of India (SBI) said the rupee could depreciate further as RBI was worried over the cost of intervention.

“Sterilisation [dollar purchases are sterilised through open market sale of government bonds] by the RBI comes with associated costs. These costs arise because the RBI, in lieu of sterilising, substitutes higher yielding government securities with lower yielding foreign securities,” SBI’s chief economic adviser Soumya Kanti Ghosh said in the report.
The benchmark equity indices lost ground on Tuesday, which was also the fourth consecutive session of losses. Sensex lost 154.60 points or 0.40% to close at 38,157.92. The broader Nifty settled the day at 11,520.30, down 62.05 points or 0.54%.(The Hindu ).