As a result of the strong US dollar and ongoing outflows of foreign funds, the rupee on Thursday fell to an all-time low of 78.32 against the US dollar. Due to early trade weakness in the US dollar and crude oil, the local currency at the interbank foreign exchange market started the day higher at 78.26 and increased to the day’s high of 78.22. The rupee’s attitude was later hurt by a recovery in the greenback and Brent crude, sending the local currency to a day’s low of 78.38. At its record low value versus the US dollar, the rupee ultimately finished unchanged at 78.32.
Parmar further said that there is a high chance of a near bounce amid a fall in commodities, strength in regional currencies and recovery in risk assets. ”Spot USDINR is expected to be in the narrow range of 78.10 to 78.50 before heading towards 79 odd levels,” Parmar said. The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.41 per cent to 104.62.
The dollar had weakened in the early session in Asia after the US Federal Reserve chairman said a recession is possible as the US central bank raises interest rates to cool surging inflation. The rupee erased early morning gains as safe-haven demand drove the greenback ahead of quarter-end adjustments, said Dilip Parmar, Research Analyst, HDFC Securities.
Brent crude futures, the global oil benchmark, edged higher 0.3 per cent to USD 112 per barrel after initial losses as investors weighed recession fears. According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the local unit continued to remain under pressure amid rising concerns of a recession. Asian and emerging market peers were weak except for the Chinese Yuan and Malaysian Ringgit.
The Yen continued to gain amid safe haven appeal for the currency, Iyer said. The rupee traded in a range of 78.20-78.40 and ended near 78.30 as the dollar traded neutral along with range-bound capital market, Jateen Trivedi, VP Research Analyst at LKP Securities. ”Rupee weakness can continue till the time crude stays above USD 95 per barrel, any breach below USD 95 per barrel and lower level sustained on crude shall provide strong support to the rupee,” Trivedi said.
”India’s bond yields ended higher as traders booked profits. The benchmark 6.54 per cent bond ended at 7.42 per cent, against yesterday’s close of 7.40 per cent,” Iyer said. The US Dollar Index was trading higher in Asian trade, while the euro and the Sterling remained under pressure against the greenback as disappointing German and French PMI data confirmed the euro zone economy is struggling to gain traction.
Meanwhile, as per minutes of the latest Monetary Policy Committee (MPC) meeting released on Wednesday, all the six members of the MPC, including the RBI Governor, expressed concern over continued high inflation and stressed that the central bank’s endeavour would be to bring down the rate of price rise within the target range.
India witnessed a current account deficit of 1.2 per cent of GDP in 2021-22, against a surplus of 0.9 per cent in FY2020-21, due to a wider trade deficit, the Reserve Bank said on Wednesday. In absolute terms, the deficit for FY22 came at USD 38.7 billion as against a surplus of USD 24 billion in the year-ago period, data released by the RBI showed.
On the domestic equity market front, the BSE Sensex ended 443.19 points or 0.86 per cent higher at 52,265.72, while the broader NSE Nifty gained 143.35 points or 0.93 per cent to 15,556.65. Foreign institutional investors remained net sellers in the capital market on Thursday as they offloaded shares worth Rs 2,319.06 crore, as per stock exchange data.
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