The rupee weakened but remained resilient amid a broad global sell-off on the back of renewed bets on massive interest rate hikes by major central banks that pushed the dollar to a new two-decade high on Wednesday.
Bloomberg quoted the rupee at 79.9212 to the dollar, compared to Tuesday’s close of 79.8375. The local currency opened at 79.8550 and traded in the range of 79.8400 to 79.9437, according to the news agency.
PTI reported that the rupee fell 7 pounds to temporarily close at 79.89 against the dollar.
Anuj Chowdhury – Sharekhan Research Analyst by BNP Paribas told PTI that the strong dollar abroad weighed on the rupee sentiment.
“We expect the rupee to remain weak due to the strength of the US dollar and weak signals from global markets. The dollar index has risen to its highest level in 20 years and is currently trading around 110.45 levels. The recovery of crude oil prices from low levels may also affect the rupee,” said Mr. Chaudhry.
The dollar has risen this year against almost the world’s major currencies, with the rupee hitting multiple lows and declining more than 7 percent in 2022, along with stagnation in other emerging market currencies.
A Reuters poll of foreign exchange strategies shows there is more trouble ahead for the already battered rupee near an all-time low against the dollar, with the currency expected to remain vulnerable to a worsening trade balance.
“Until the Federal Reserve presses the brakes and crude oil prices continue to decline significantly, the INR and other emerging market currencies will likely continue to reach all-time lows against the US dollar,” said Brendan McKenna, international economist and forex strategist at Wells Fargo Securities, Reuters.
“Disappointing growth momentum and slowdown in China is now growing on the RBI’s radar screen… which could exacerbate the sell-off over the next couple of months or so,” he added.
The US Dollar Index, which measures the performance of the greenback against its six major peers, was around 110.24, after hitting a 20-year high of 110.69 earlier in the session.
The Japanese yen fell to 144.015 against the US dollar, breaking its previous low since August 1998 at 144.38 yen to the dollar.
The Chinese yuan fell to its lowest level in two years, approaching the psychologically important 7 mark for the dollar despite the steps taken by the authorities to stop its decline.
While the euro gained a touch, it is still below par with the dollar, at $0.9925, and the British pound is down slightly at $1.15045.
Britain’s new prime minister, Liz Truss, has promised urgent action to support the faltering economy, which is now suffering from double-digit inflation and a possible long-term recession.
A soaring dollar, driven by rising Treasury yields and concerns about the outlook for the economy, is undermining risky assets and tightening financial conditions.