Rupee trades at 71.78 per dollar, recovers 25 paise

The Indian rupee settled at 71.99 per US dollar, which is down 24 paise from its previous close of 71.75, on Thursday, when it recorded a new low of Rs. 72.10 per US dollar.

On Friday, the rupee gave a slight glimmer of hope after reporting a marginally high opening of 71.95 per dollar in the morning session.

The Indian Rupee has been on a downward spiral as it depreciated by about 13 per cent so far in the calendar year 2018, of which 5 per cent dip was recorded in the past month, and 3 per cent in the last seven straight sessions. Thus, the local currency has dwindled from Rs. 70 to 72 a dollar in 21 sessions.

The major driver behind this depreciation is the consistent demand for the dollar. The hike in oil prices have widened the country's deficits in a period where government expenditure is on the rise. Inspite of this, the rupee was able to somewhat regain its footing marginally on account of support from the RBI which stepped in to supply the much-needed dollars which aided the recovery. Also, stability in the currencies of emerging markets like the Argentinian Peso and Turkish Lira is believed to have assisted in the recovery.

If the rupee continues to depreciate at such a fast pace, then the RBI is likely to intervene in order to curb this hasty decline. A more optimistic view is that with the GDP exceeding 8 per cent due to increasing economic activity, the strain on the Indian Rupee should reduce.