Rupee weakens near two-decade high of dollar
The rupee weakened sharply on a broader dollar appreciation and global selling in riskier assets ahead of key US jobs data, as investors brace for aggressive rate hikes from the Federal Reserve.
Forex traders said, while oil prices remained weak, weak Asian and emerging market peers and expectations of higher inflation weighed on the domestic currency.
PTI reported that the Indian currency temporarily closed at 79.81, down 25 paise against the greenback.
“Taking cues from regional currencies, the rupee depreciated against the US dollar. Risky mood and higher crude oil prices also weighed on the local unit,” Dilip Parmar, Research Analyst, HDFC Securities told PTI.
Bloomberg quoted the rupee at 79.7875 per dollar from 79.5563 in the previous session, with currency trading in a range of 79.6062 to 79.8300.
Reuters said the partially convertible rupee ended at 79.7950, compared to its previous close of 79.5550. However, it closed up 0.1 percent for the week, its first gain in three.
According to the data, India’s initial estimated trade deficit for July was $28.7 billion, slightly lower than the record $30 billion figure in July.
“The number of trade losses will be a matter of concern, but I don’t think the rupee’s reaction is because of that. It’s mainly a jump in the dollar,” Ritesh Agarwal, head of treasury at CTBC Bank, told Reuters.
The continued strength of the dollar will ensure that the rupee crosses the 80 level even if the Reserve Bank of India (RBI) tries to protect it, he said, adding that the rupee could be at 80.5 by the end of September.
The domestic currency broke the key 80 per dollar level earlier this week to hit a weak new record of 80.12, which it has recovered from RBI’s support.
The dollar was headed for a third consecutive weekly gain and was near a two-decade high against other major currencies.
Since Fed Chairman Jerome Powell said last Friday at the Jackson Hole symposium in Wyoming that rates would need to be higher “for some time” to combat inflation, the US currency has been rising.
“We will continue to see clear signs of an economic slowdown in the US, including more cautious comments from the Fed to end the USD rally,” said Commerzbank currency analyst Yu-Na Park-Hager. Comment.