Fall in crude oil prices in international markets limited the loss of rupee
Fall in crude oil prices in international markets limited the loss of rupee
The rupee on Thursday settled near a historic low of 80-mark against the US currency as it closed lower by 18 paise at 79.9975 amid a strong greenback in overseas markets.
While wholesale inflation remained in double digits for 15 consecutive months to June, the expected fall in the country’s current account deficit and foreign exchange outflows pulled the local unit closer to the psychological low of 80 against the greenback.
However, a sharp fall in crude oil prices in the past few days provided relief to the local currency, analysts said.
At the interbank forex market, the rupee started the day on a strong note and touched a high of $79.71 in early trade. The local unit lost momentum after the dollar hit a 24-year high against a basket of global currencies in early European trade.
The rupee finally settled at the day’s lowest level at $79.9975, down 18 paise from its previous close of 79.81.
Some of the major banks like SBI were already placing bids above the 80 level for selling the US Dollar.
Wholesale price-based inflation eased to a three-month low of 15.18 per cent in June on sharp fall in mineral prices, but food items remained expensive. June is the 15th consecutive month when wholesale inflation remained in double digits.
Last month it touched a record high of 15.88%. It was 12.07% in June 2021.
An update by the Finance Ministry said that India’s current account deficit is expected to worsen in the current financial year due to costly imports and weak merchandise exports.
To meet the financial needs of CAD and rising FPI outflows, foreign exchange reserves have declined by $34 billion in the six months since January 2022.
“Indian rupee becomes average performer among regional currencies. Rupee closes at record low for fourth consecutive day amid safe-haven demand for dollar after US inflation hit 41-year high. Now rate market research analyst at HDFC Securities” “Aggressive rate hikes from the Federal Reserve, which supported the dollar,” said Dilip Parmar.
Spot USD/INR delayed the 80 level in today’s session but a breakout is expected in the coming days. He noted that the pair has found resistance at 80.90 after crossing 80 while support has shifted from 78.50 to 78.80.
“The rupee remained under pressure as the dollar rose sharply against its major crosses. Today it has come down to the lowest level ever against the US dollar. Market participants remained cautious ahead of the (US) inflation data released yesterday. Gaurang Somaiya, Forex and Bullion Analyst, Motilal Oswal Financial Services, said, “The data has accelerated year-on-year consumer price growth to 9.1 per cent.
This fueled speculation that the Federal Reserve would raise interest rates by 75 basis points higher than previously expected. He said that we expect USD/INR (Spot) to trade with a positive bias and bid in the range of 79.40 and 80.00 in the near term.
Sugandha Sachdeva, Vice President, Commodity and Currency Research, Religare Broking Ltd. said, “Aggressive policy move by the US Fed to contain rising price pressures is adding to the fears of a weak growth outlook and leading to a risk aversion in the market.
“Furthermore, we have seen a steady rise in the dollar index, while the euro has been hit hard as it fell below parity against the dollar for the first time in nearly 20 years. Europe is grappling with energy supply shortages due to sanctions. Russia which makes it more vulnerable to recession risks.
“This marks a major moment of strength for the greenback as markets are expecting the US Fed to raise rates more rapidly than its peers,” Sachdeva said.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.3 per cent higher at 108.58 as it moved closer to parity with the euro.
On the domestic equity market front, the BSE Sensex closed 98 points or 0.18% lower at 53,416.15, while the broader NSE Nifty fell 28.00 points or 0.18% to 15,938.65.
Foreign institutional investors became net buyers in the capital markets on Thursday as they bought shares worth Rs 309 crore, according to exchange data.
Global oil benchmark Brent crude futures fell 2.20% to $97.38 a barrel.