The Indian Rupee continued to slide downwards on Tuesday as it slipped to a fresh record low of 79.58 against the US Dollar, down 15 paise from previous close of 79.43, amid weakness in the equity markets, strength in dollar. Amid the constant pressure on the local unit due to persistent FII outflows, elevated crude prices and risk aversion in markets, the Reserve Bank of India (RBI) on Monday said that it was putting in place a mechanism to settle international trade in rupees. Despite the recent RBI measure to curb the fall, the rupee slipped on opening today. The dollar index, which tracks the currency against a basket of six peers, rose to 108.3, the highest since October 2002. Widening trade deficit, decline in the foreign exchange reserves and higher global energy prices are among the factors pushing the rupee lower, according to Rahul Kalantri, VP Commodities, Mehta Equities.
“The biggest driver of the rupee fall is capital outflows along with unprecedented dollar demand across the globe. Worries over recessions and higher inflation push the dollar to a multi-year high. RBI’d move to allow global trade settlements in rupees could primarily be aimed at facilitating trade with sanctions-hit Russia. The measures are good for the longer run, but the short-term trend of the rupee will be driven by global factors. Looking at the USDINR, 79.90 acts as resistance while a close below 78.85 required for meaningful corrections,” said Dilip Parmar, Research Analyst, HDFC Securities.
“RBI has taken steps that could ease the pressure on the rupee viz-a-viz country’s deficit. However, so far the positive impact of the same hasn’t yet been translated into the USDINR pair given by overpowering glooms and risk-averse environment globally. Investors now await India’s June CPI release which is expected to be a tad bit lower than May at 7.03%. Moreover, the given fundamentals shall likely sustain its pressure on the rupee keeping the upside open well in place. As the pair breaks its crucial 79.50 levels, it is little far from the next big figure of 80.00 levels that could be seen in the short run,” said Amit Pabari, MD, CR Forex Advisors.
“Euro neared to parity a 21-year low against the dollar as the dollar index rose to as high as 108.32. Brent was at 105.50 slightly lower on recession concerns. Asian currencies were all lower against the dollar as KRW went back to 1313 and yuan fe to 6.74 levels. So no respite from rupee on any front except selling of $ by RBI. The range for the day is 79.40 to 79.60. Exporters may sell near to 79.60 while exporters may buy sny good dip or match their imports with exports. Waiting for more measures from RBI,” said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors.
In the previous session, rupee dropped 19 paise to close at a record low against the US dollar, after settlements. At the interbank forex market, the local unit opened weak at 79.30 against the greenback and witnessed an intra-day high of 79.24 and a low of 79.49. After hitting a series of record lows in recent months, the local unit closed out Monday at 79.44 per dollar.
(To be updated…)