Rupee drops below 88/$ mark 1st time, down 57p in a day

Mumbai: The rupee on Friday breached the 88-mark for the first time, hitting a record intra-day low of 88.31 against the dollar before recovering slightly to close at 88.20. The currency ended 57 paise weaker than its previous close of 87.63 - its sharpest one-day fall in three months. Dealers said the losses would have been deeper but for the RBI's intervention.

"The earlier all-time low of 87.94 which acted as a resistance was breached today afternoon in spite of RBI's intervention throughout the morning session. As soon as 87.94/95 level broke, stop losses got triggered and there was widespread dollar buying. The spot fell to new low of 88.30/31 wherein RBI intervened heavily to calm down the situation and the rupee closed at new low of 88.20/21," said KN Dey, a forex consultant.

The rupee ended Aug with a 0.68% loss, extending its losing streak to four months, following an additional 25% US tariff that doubled duties on Indian goods to 50%. The higher tariff has raised concerns over the balance of payments, foreign inflows, and trade deficit.

There is growing fear that growth in the current fiscal could slip below 6% if the US persists with the 50% duty. The RBI has already trimmed its growth forecast after the first tariff round, and the second hike could trigger another revision.

Market participants said that on Friday, apart from panic buying by importers, exporters cancelled forward sell transactions owing to restrictions on US exports. Foreign institutional investors remained net sellers, with equity flows turning negative. Exporters may take three to four months to find new markets.

"We are in the middle of the storm, it is not over as yet. The rupee will continue to remain under pressure," Dey said. Data shows exports to the US account for 2.2% of GDP, raising concerns that a slowdown in labour-heavy sectors could hit jobs.