Rupee sinks to 80 against US dollar for the first time ever
The rupee hit a record low of 80 against the US dollar on Tuesday after touching a series of lows in the recent past. Rising dollar and losses in domestic equities put pressure on the currency. Easing oil prices however yielded support.
The rupee sank to a fresh record low on Tuesday, dropping below the 80 mark against the US dollar for the first time ever. The latest bout of weakness in the rupee comes at a time when the greenback has held steady at 20-year highs on fears that aggressive hikes in COVID-era interest rates might trigger a recession in the world's largest economy.
Persistent strength in the US currency and losses in domestic equities put pressure on the rupee. However, easing crude oil prices lent some support.
The rupee has fallen over two percent in the last one month and seen a decline of almost eight percent since January 2022.
Also Read:
Many analysts fear the rupee extend its slide to even lower levels going forward.
“We expect the rupee to close the Q3 at 81, so there is still an upside to the dollar rupee," Steve Englander, Global Head of G10 Fx Research and North America-Macro Strategy at Standard Chartered, told CNBC-TV18.
This month, the RBI came to the rescue of the rupee, by announcing measures to enhance forex inflows including incentives to banks to have more foreign deposits. It also removed the interest rate caps on deposits over one year.
Extra inflows in the forex market could mean some respite on the current account deficit front. A current account deficit occurs when the total value of goods and services a country imports exceeds ones it exports.
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, said, "Rupee fell as broader strengthen in the dollar continued ahead of the important FOMC policy statement that will be released next week. Expectation is that the Fed could raise rates by another 75bps and maintain a hawkish stance." He added that widening domestic trade deficit is also weighing on the rupee. "We expect the USDINR (Spot) to trade with a positive bias and quote in the range of 79.70 and 80.20."
Citi raised the USDINR forecast to 79-81 as Citi forex strategists see the dollar index rising to 111. Citi said that RBI avoiding disorderly rupee moves via sale of its forex reserves, likely dollar depreciation over 6-12 months and better balance of payment dynamics in 2HFY23 and the central bank keeping REER within its preferred range (101-106) are the reasons for stabilisation in rupee depreciation trend.
Global oil prices edged lower on Tuesday amid expectations that the Fed's interest rate hike may be less than anticipated. Brent futures fell as much as 6.4 percent to $99.5 a barrel. West Texas Intermediate (WTI) futures followed suit, and were almost a percent down to $98.6 a barrel.
The dollar Index — which gauges strength in the greenback against six peers — climbed 0.2 percent to 107.5.
Domestic equity benchmarks BSE Sensex and NSE Nifty50 made a gap-down start on Tuesday.
The rupee had settled at 79.97 against the US dollar in the previous session.
First Published: Jul 19, 2022 9:46 AM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Lok Sabha Election 2024: Issues raised by Prime Minister Modi have not resonated with people of Tamil Nadu, says Congress
Apr 19, 2024 11:38 PM
West Bengal Lok Sabha elections 2024: A look at Congress candidates
Apr 19, 2024 8:45 PM