The rupee today hit a new all-time low of 79.57 against the US dollar in the backdrop of a broader rally in the US dollar. The dollar index, which tracks the currency against a basket of six equivalents, rose to a high of 108.3 since October 2002. Weakness in the euro is a big part of the dollar index’s push, as well as the safe-haven appeal of the US currency, attracting investors amid concerns over growth elsewhere.
The euro neared a near 20-year low for the dollar amid concerns that the energy crisis could push Europe into recession.
Growing trade deficit, falling forex reserves and high energy prices globally are also adding to the pressure in the market. Rupee “We expect rupee to remain volatile this week and test 79.80-80.05 levels,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
Currency traders will focus this week on US inflation data and comments from Federal Reserve officials as they look for clues to the outcome of the Fed’s upcoming policy meeting. A higher inflation reading will put pressure for the Fed to increase its already aggressive pace of raising interest rates.
The rising trade deficit has put pressure on the value of the Indian currency. According to the recently released data by the Ministry of Commerce and Industry, India’s trade deficit widened to $25.63 billion in June. For the first quarter of the current fiscal, the trade deficit widened to $70.25 billion due to higher imports.
However, growth apprehensions were weighing on oil as well. Brent crude fell to $106.04 per barrel. Although FII selling of Indian stocks has come down slightly in the recent past, they are still net sellers. On Monday, he quoted Indian shares as . sold 170 crore on net basis
reserve Bank of India The RBI on Monday asked banks to make additional arrangements for export and import transactions in Indian rupees in view of the growing interest of the global trading community in the domestic currency. However, banks will require prior approval from the Foreign Exchange Department of the Reserve Bank of India (RBI), the central bank said in a circular.
“This is a good step. This will make the rupee more tradable globally in offshore centres. I think the volume of NDF will increase further. This is a step towards making the rupee an internationally traded currency. will increase acceptance.It will also weaken the use of Dollar in the long term. These can be traded directly without the involvement of dollars. Making it more tradable, acceptable. Foreign buyers can open Vostro account with an Indian bank and they can make payments to Indian exporters in Indian Rupees. The FX risk gets transferred to the overseas buyer as the rupee amount is settled (since the invoice is made in INR). (with agency input)