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Rupee plunges to record low of 41.19 after low S&P rating
The foreign exchange market reacted adversely to the lowering of India's rating by Standard and Poor. Rupee fell to a record low of 41.19. Chaos reigned in the market after the news of the downgrading of India's credit rating arrived. The dollar hit the lowest ever 41.19 within hours of the market opening for the day. Finally the rupee closed at 41. Experts said fall in the rating led to the collapse. Rupee is expected to stabilise between 41.50 and 42. Traders said the Reserve Bank had offloaded inadequate dollars in the market. They also felt that S&P was unduly hurried in making the rating. It should have waited for the Budget before arriving at its conclusions. Formerly for project deals companies were spending 225 basis points over Libor for the 10 year paper. Now it is expected to rise to 300 basis points. At present, the power and finance corporation is spending 126-128 basis points over Libor for a $100 million term loan facility. The immediate impact will only be marginal because India was below investment grade on Standard and Poor’s scale, said assistant director of Standard Chartered Bank R Rangarajan. While additional interest will not be forthcoming, that committed and the syndicating loan market should not be affected, he added. (Business Aaj Tak)