Worst 5 closings of rupee against US$

The month of June is associated with onset of rains. However, coincidentally it is also associated with rupee depreciation. Today's chart of the day shows how on all 5 occasions in the past rupee has had its worst performance against US dollar in the month of June. Though June month depreciation is a mere co-incidence market participants are worried about the sudden steep decline in rupee. The depreciating rupee is an indication that country is not attracting enough foreign inflows. At the same time it also indicates that foreign capital is fleeing Indian markets. Rising inflation and increase in demand of dollars by oil companies has put further pressure on the rupee. Increasing demand for gold which is bought and sold in dollars has also hurt rupee. All these factors have led to sudden fall in rupee.

But the question is will this fall continue and will rupee breach its lowest level of 57.16 against the US dollar as witnessed on 22 June 2012. While it is difficult to say whether this will happen or not the recent steep fall gives an indication that unless some sort of external intervention takes place the fall might continue. That's because all the odds are currently stacked against rupee. Foreign fund flows are drying up. Also, current account deficit is widening. Inflation is high. All these factors indicate that there is a case of further downside from current levels for the rupee. 

                        

                                                          Data source: Bloomberg, Business Standard, Economic Times