The rupee today staged an impressive rebound from life-time low levels, surging by 21 paise to end at 68.84 against the US dollar on suspected the central bank’s intervention to check volatility in currency markets. The sell-off in the rupee accelerated in early trade, with the local unit plunging to a new historic low of 69.13 before recouping losses. Suspected intervention by the Reserve Bank of India (RBI) through state-run banks and short-selling the dollar by some foreign banks predominantly triggered the recovery momentum.
The greenback took a reverse turn and slipped below one-year high after President Donald Trump criticised the Federal Reserve’s interest-rate increases and expressed concerns about strengthening currency, adding that it would put the US at a disadvantage to other economies.
The dollar index, which shows greenback’s strength against a basket of currencies, fell by 0.66% to 94.53 today. The US dollar has gained more than 5 per cent in the past three months on expectations the US central bank will keep raising interest rates in the coming months. The US Fed has raised interest rates five times since Trump took office in January 2017.
Forex sentiment turned highly volatile initially tracking the Chinese yuan’s fall to its weakest in more than a year, as a trade dispute between the world’s two largest economies intensified. Deteriorating domestic macro scenario coupled with global uncertainty shocks could continue to keep the rupee under severe pressure in near term, a forex dealer commented. Most Asian currencies were trading flat to higher against the dollar.
In the meantime, crude prices were little changed and set for a sharp weekly drop on concerns over oversupply and the ongoing trade conflict between the US and China. The benchmark Brent was trading at USD 72.55 a barrel in early Asian trade.