Indian rupee could slide to 82 against US dollar in near-term. Key triggers
- The Indian rupee today fell to new low of 79.74, edging closer to 80 per dollar mark
The Indian rupee continued to fall to hit a record low for a fourth straight session on Thursday as the US dollar continued its relentless rise against other major currencies, while domestic bond yields rose. Foreign institutional investors continued to dump Indian equities, putting further pressure on the Indian currency.
The rupee today fell to new low of 79.74, edging closer to 80 per dollar mark, as dollar resumed its relentless rise, driven by both expectations for faster policy tightening by the Federal Reserve and safe-haven flows as fears of a recession grow.
“The rupee is expected to depreciate today amid strong dollar and risk aversion in global markets. Market sentiments are hurt as red hot inflation in the US stoked bets that the US Fed may have to raise interest rates much more than expected, even 100 bps. Additionally, consistent FII outflows and concerns on looming recession may hurt rupee. US$INR (July) is expected to trade in a range of 79.50-80.00,” said ICICI Securities.
Indian bonds have declined in tandem with a slide in the rupee. The currency is now hovering close to a record low against the dollar as elevated commodity prices stoke inflation and boost the subsidy bill. The options market is pricing in a 64% chance that the rupee will weaken to 82 per greenback in the next six months from around 79.6 now, as per Bloomberg.
India imports more than two-thirds of its oil requirement and high global crude prices have threatened to push up the country's trade and current account deficits even further and have been a key factor in hurting the rupee.
The threat of a US downturn is the latest risk confronting Indian bonds after a weakening rupee and accelerating inflation propelled benchmark yields to the highest in over two years in June. A slowdown in the world’s biggest economy may exacerbate the pressure from outflows, after global funds sold the notes for five months through June.
US' CPI data showed inflation reached a new four decade high bolstering expectations that the Fed will continue its aggressive monetary tightening policy. The market now expects even a 100 bps rate hike in the upcoming Fed meeting.
(With inputs from agencies)
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First Published:14 Jul 2022, 10:08 AM IST
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