The Indian rupee erased early gains to hit an all-time low of 70.1 per dollar on Tuesday, as concerns about Turkey's economic woes persisted, Reuters reported.

Jameel Ahmad, global head of currency strategy and market research at United Kingdom-based foreign exchange broker FXTM, explained to Zawya in an email interview why the rupee is falling, giving his view on the short- and long-term outlook for the Indian currency.

“There are a number of different reasons to explain the Indian rupee’s current suffering, which hit the news headlines early this week after falling to a new all-time low against the US dollar. The catalyst behind this can be articulated mostly by referring to what has been driving emerging market FX across Asia sharply lower over the past couple of months - a prolonged ‘risk-off’ atmosphere from investors.

“Investors generally remain highly alert, and it can be said anxious, towards uncertain external headwinds that are consequently weighing on their appetite towards taking on risk. This includes the recent severity in escalation around the Turkish Lira currency crisis, trade war concerns and the ongoing political risk element stemming from the unpredictable nature of the Trump administration,” Ahmad said.

“What has also not helped the rupee is that the greenback (USD) remains so heavily in demand by traders. This has weighed on all emerging market currencies across the globe. I would say personally how the dollar moves from here on will decide whether the Indian rupee hits further all-time lows.

“If the dollar does suffer from its own round of profit-taking, this would improve the likelihood of the Indian rupee regaining its composure further down the line,” he concluded.

Further reading:
Indian rupee hits record low, mild RBI intervention seen
Indian rupee breaches 70 per dollar mark, as Turkey concerns persist
Record rupee plunge sparks surge in remittances to India
India's July inflation eases, c.bank may hold on rates

(Writing by Shane McGinley; Editing by Michael Fahy)
(shane.mcginley@thomsonreuters.com)

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