Rupee falls to fresh record low for 4th straight session on strong dollar, risk aversion in markets

Indian rupee hit a fresh record low against the US dollar for the fourth straight session on Thursday after faster-than-expected June inflation data in the US fueled the speculations that the Federal Reserve may raise key interest rates by as much as one percentage point in the upcoming meeting.

Rupee falls to fresh record low for 4th straight session on strong dollar, risk aversion in markets
With the most recent fall, the domestic currency touched 79.83 against the US dollar. The rupee was trading at 79.77, down 0.17% from its previous close of 79.64.

Indian rupee hit a fresh record low against the US dollar for the fourth straight session on Thursday after faster-than-expected June inflation data in the US fueled the speculations that the Federal Reserve may raise key interest rates by as much as one percentage point in the upcoming meeting. This month alone, the domestic currency has dropped to record lows seven times. With the most recent fall, the domestic currency touched 79.83 against the US dollar. The rupee was trading at 79.77, down 0.17% from its previous close of 79.64. The local unit is already under pressure due to continued outflow by foreign investors amid recession fears. So far this year, FIIs have sold around $29.16 billion in equities.

According to Dilip Parmar, Research Analyst, HDFC Securities, “The rebound in crude oil prices and risk-averse sentiments could weigh on the rupee along with the weaker regional currencies. On Wednesday, spot USDINR gained 3 paise to 79.6350, another record high close this week. The view remains bullish for the pair as long as it trades above 78.80 while on the higher side it could face stiff resistance of 80.”

Rupee to remain volatile this week, could hold key support level of 80.05

“We expect the dollar index to remain volatile in today’s session and continue to hold its key support level of 106.40 on a daily closing basis. On the other hand, the rupee slipped to lifetime lows on Wednesday. The euro is trading at 20-year lows, Japanese yen slipped to 27-year lows and other currencies are also struggling against the dollar. The rupee also plunged amid further weakness in the domestic equity markets and continuous FPI outflows. We expect the rupee to remain volatile this week and could hold its key support level of 80.05,” said Rahul Kalantri, VP Commodities, Mehta Equities.

RBI steps to not provide any short-term respite

“The rupee has been under pressure and trading at its all-time low as the higher-than-expected June US Inflation data has increased the probability of a 100 bps rate hike by the Fed, further, the relentless FIIs selling has exacerbated the issue. Another point to note is that the Indian forex reserves fell to the lowest level in over 14 months, making it an impediment for the RBI to control the further downside on the rupee. Recently, RBI allowed banks and traders to invoice and settle global transactions in rupees. This is a longer-term step to make the rupee more international nevertheless, we don’t expect any short-term respite due to this move,” said Santosh Meena, Head of Research, Swastika Investmart.

Meanwhile, the domestic markets were trading with nominal gains on Thursday as investors digested a 41-year high retail inflation in the US at 9.1 per cent for June. The BSE Sensex rose 180 points to 53,700, and the NSE Nifty 50 advanced 60 points to 16,031. The broader markets also opened in green. The BSE MidCap and SmallCap indices were up to 0.11 per cent higher. Nifty healthcare led gains among sectors, rising 1.2 per cent. FMCG and consumer durables were other notable gainers, up 0.5 per cent each. While Nifty PSB fell the most, IT pack was also weak.

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