Rupee hits new lows vs US dollar, analysts see more weakness
2 min read . Updated: 22 Jun 2022, 04:44 PM IST
Premium- Rupee rate today: The dollar index and the U.S. bond yields are getting support from the U.S. Fed’s aggressive rate hike plans and putting pressure on emerging market currencies, including the rupee.
Indian rupee today fell to fresh record low of 78.40 against the US dollar amid broad weakness in emerging market currencies. The rupee had closed at 78.13 in the previous session. The dollar index hovered near two-decade highs of 104.507 as investors fretted over higher global interest rates and rampant inflation. The Sensex was down 700 points and was near day's lows.
“The dollar index and the U.S. bond yields are getting support from the U.S. Fed’s aggressive rate hike plans. We expect the dollar index could show further strength and could test the 105 mark again in upcoming sessions," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
“On the other hand, the rupee showed weakness despite recovery in the domestic equity markets. The aggressive interest rate hike plans of the U.S. Federal Reserve and continuous sell-off by the FIIs are exhibiting pressure on the rupee. Widening trade deficits and high crude oil prices are also restricting gains of the rupee. We expect the rupee to remain volatile this week and could test its resistance level of 78.45," he added.
Despite Tuesday's recovery in Indian equity markets, FIIs sold Rs. 2701 crore, pushing the monthly withdrawal towards Rs. 41,000 crores, said CR Forex Advisors in a note.
Equities and oil prices tumbled today in global market with recession fears continuing to build as central banks hike interest rates to combat decades-high inflation. Currency traders will be looking ahead to Federal Reserve boss Jerome Powell's two-day testimony to Congress this week for an idea about officials' plans for fighting runaway prices. Most observers expect the Fed to hike rates sharply several more times this year, having announced such a move this month -- the sharpest lift in almost 30 years.
“US dollar index was seen rebounding from its low below 103.75 levels, whereas Euro and Pound remained mixed. On another side, Yen hit a fresh 24-year low against the USD. In the energy pack, oil prices are down by almost 9%, and Natural gas prices by 10% over the last week. That apart, there has been selling pressure across major commodity prices as worries over recession have hit the demand outlook. This could turn into a strong positive point for rupee if other fundamentals follow the suit. Overall, one can expect the pair to trade in a range of 77.80 to 78.30 levels before giving a breakout on either side," it added.
The rupee declined by 27 paise to a record low of 78.40 (provisional) against the US dollar on Wednesday due to unabated foreign fund outflows and losses in the domestic equities.
A stronger greenback overseas also weighed on the rupee sentiment, forex traders said. However, receding crude prices in the international market restricted the rupee's loss, they added.
At the interbank foreign exchange market, the local currency opened flat at 78.13 against the greenback and witnessed an intra-day high of 78.13 and a low of 78.40.
The dollar index, which gauges the greenback's strength against a basket of six currencies, strengthened by 0.05 per cent to 104.48.
Brent crude futures, the global oil benchmark, dropped 4.46 per cent to USD 109.54 per barrel.
On the domestic equity market front, the BSE Sensex ended 709.54 points or 1.35 per cent lower at 51,822.53, while the broader NSE Nifty fell 225.50 points or 1.44 per cent to 15,413.30.
Foreign institutional investors remained net sellers in the capital market on Monday as they offloaded shares worth ₹2,701.21 crore, according to the stock exchange data. PTI BAL MR MR
