The strengthening of the dollar against its major peers and the resurgence of COVID-19 infections in Asia’s largest economy hit demand for the Chinese currency.
The strengthening of the dollar against its major peers and the resurgence of COVID-19 infections in Asia’s largest economy hit demand for the Chinese currency.
The Indian rupee declined against the dollar on Monday, tracking a decline in Asian currencies led by the Chinese yuan.
The rupee closed at 79.8425 per US dollar, down from 79.7950 in the previous session.
The offshore Chinese yuan fell nearly 0.5% to below $6.95, its lowest level since August 2020. The dollar’s strength against its major peers and a resurgence of COVID-19 infections in Asia’s largest economy dampened demand for the Chinese currency.
Over the past three weeks, the yuan is down more than 2% and is not far from the psychological 7 level.
“The rise in USD/CNY is sure to put more pressure on the Asian pair, although relatively lighter on the rupee,” said Srinivas Puni, Managing Director, QuantArt Market Solutions. “USDINR is heading upwards from here in the coming months, as structural issues assert themselves.”
The “persistent” high trade deficit will be a “perennial pull on the rupee”, he said.
On Monday, the dollar index climbed above 110 for the first time in two decades.
Russia’s indefinite shutdown on one of its main gas supply pipelines in Europe fueled concerns over energy prices and growth, weighing on the euro and sterling, while pulling the dollar index higher.
The dollar index rose despite a fall in US Treasury yields after a mixed jobs report on Friday, prompting traders to dial up bets on a 75 basis rate hike by the Federal Reserve this month.