Rupee at all-time low against US dollar
The Indian rupee on Friday hit a record low against the US dollar after foreign portfolio investors (FPIs) exited the equity market and a possible outflow of dollar to rising oil prices led to capital flight.
At the inter-bank exchange, the Indian rupee fell 19 paise to 77.93 against the dollar on Thursday, compared to its previous close of 77.74, a previous record low.
Sugandha Sachdeva, Vice President, Commodity & Currency, said, “The rupee has hit a new record low after a prolonged consolidation phase amid intense price pressures and concerns about re-imposition of some lockdown restrictions in China. Risk sentiments have soured.” Research, Religare Broking Limited
He said the rise in crude oil prices to a three-month high due to supply tightness was adding to inflationary concerns and hurting the global economy, which is already under pressure from major central banks and the Russia-Ukraine crisis. The tightening of monetary policy was strained.
“In addition, the World Bank has slashed its global growth forecast to 2.9% in January against its previous estimate of 4.1%. These are major headwinds in the current scenario for the domestic currency and lead to a flight of foreign capital inflows, fueling demand for the safe-haven dollar,” she said.
Markets, she said, were now awaiting US CPI data as well as the Fed’s next meeting, when rates are expected to be announced a hike of 50 bps, the third consecutive rein in decades by the US central bank. Growth – high inflation.
“As of now, we envisage devaluation of rupee towards 78.20 points in near term and 78.50 points from medium term perspective,” Ms Sachdeva said.
According to Ravi Singh, Vice President and Head of Research, Share India, a strong US dollar and market liquidity stimulated the volatility and weakness of the rupee.
“Geopolitical tensions and rising inflation have increased economic uncertainty and concerns around growth. Though RBI has started taking steps to curb inflation and control liquidity, the strengthening of dollar has neutralized the impact,” he said.
“However, given the strong foreign exchange reserves and fiscal tightening measures, the rupee does not depreciate much from the current levels. Resistance is near the level of 78 and it is unlikely that the level will be broken in the near term,” he said.