Rupee nears record low of 80 against US dollar, likely to appreciate below 79 by FY23-end
3 min read 18 Jul 2022, 03:23 PM ISTThe rupee is expected to range from 81.25-81.50 against the dollar by this year end, however, some relief is likely to be seen in March 2023-end quarter.
PremiumThe Indian rupee begins this week's trading session by further weakening against the US dollar at the interbank forex market. The local unit hit a record low of a little over 80 per dollar on Monday but pulled back slightly soon after. Meanwhile, the American currency corrected from its 20-year high mark against a basket of currencies as investors await major central banks policy announcements where a further aggressive rate hike is expected to tame inflation that is at multidecadal highs. The rupee is expected to range from 81.25-81.50 against the dollar by this year end, however, some relief is likely to be seen in March 2023-end quarter.
As per Investing.com data, the rupee is around 79.989 against the US dollar higher by over 20 paise compared to the previous close. The local unit hit an intraday high of 80.075 - touching a record low for the sixth consecutive session against the American currency.
Earlier, today the domestic currency did appreciate in the early deals and touched an intraday high of 79.714, tracking positive equities market, and a slight drop in the dollar index. But the rupee stayed near the 80 levels during the closing hours.
Last week, on Friday, the rupee touched a low of 79.96 before correcting and closing at 79.8775 against the dollar.
Sensex closed at 54,521.15 higher by 760.37 points or 1.41%. Nifty 50 jumped 229.30 points or 1.43% to 16,278.50. Banking, financials, IT, and metal stocks were top performers.
On stock performance, S Ranganathan, Head of Research at LKP securities said, "The charge of Bulls going berserk on a Monday with a broad-based rally is always a pleasant sight and what is more heartening is to see investors temper and reset their expectations for the quarter in line with the reset on the ground. The 1.5% up move seen today in the benchmark indices reflects the optimism behind the progress of the south-west monsoon as the BFSI & IT index led from the front with good support coming in from the broader market stocks."
This month, as of July 18, FPIs outflow in the Indian market is around ₹11,158 crore. Of which, an outflow of ₹9,067 crore is witnessed in the equities market, while selloffs of ₹891 crore are recorded in the debt market. There was an outflow of ₹1,140 crore and ₹59 crore in the debt-VRR and hybrid market.
Where is rupee headed?
Sriram Iyer- Senior research Analyst at Reliance Securities said, "The U.S. Dollar has been steadily moving higher amid aggressive rate hike expectations from the U.S. Fed. The idea was reinforced after the release of the latest U.S. inflation data, which to 9.1% year-on-year. The Fed futures slowly factored in a 100-bps hike from the Fed after the release. This has a negative impact on the Rupee as well."
However, Iyer added that U.S. retail sales ahead of the weekend rebounded strongly in June as Americans spent more amid soaring inflation, which could allay fears of an imminent recession and pulled the dollar lower. Additionally, most of the hawkish U.S. Fed members still believe that a 75-bps hike is a right way to go.
"But we expect that the Rupee’s gains may be short-lived as we believe that extended foreign outflows, high oil prices, growth/inflation worries, and India's twin deficits will continue to weigh on sentiments. So, in the short run weakness may persist, but India’s long-term economic potential remains positive and the rupee may also be protected by the country’s central bank," Iyer added.
In the short run, the analyst expects the rupee to trade within 79.00-80.35, but by year-end, some weakness may persist and the rupee could weaken towards 81.25-81.50. But by the end of the FY-23, the rupee could witness an appreciation back to 78.50 levels.
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