Rupee hits new low; dealers see domestic currency at 80 a dollar soon

The shed 0.2 per cent on Tuesday to mark a new closing low versus the US dollar, and dealers saw the domestic heading towards the 80 per mark in the near term.

The settled at 79.60 per US dollar, as against 79.44 per at its previous close. In the course of the day, the domestic had touched a lifetime low of 79.66 per .

With the crucial level of 79.50 per breached, the was now seen heading towards the 80 per dollar mark over the near term, CR Forex Advisors said on Tuesday.

Meanwhile, the US dollar index rose to a high of 108.56 on Tuesday, its highest level since August 8, 2002, the data from Bloomberg showed. The index, which is a gauge of the US against six major currencies, was at 108.02 at its previous close.

A surge in the greenback to a fresh 20-year high globally has eroded the appetite for emerging market currencies, dealers said. The rupee has lost 6.6 per cent against the greenback in 2022, so far.

Also Read: Asian countries in talks for settling trade in domestic currencies

“Today INR touched a new low against USD due to global factors. The dollar index has hit a 2-decade high as the euro is on the verge of hitting parity with USD and global oil prices remain high,” Bhaskar Panda, senior vice-president, Treasury Advisory Group, HDFC Bank told Business Standard.

“Against this backdrop, the current move in USD/INR is understandable and the pair can move up further if current dollar strength continues”.

The sharp rise in the dollar index has been caused by a global rush to the safety of the US currency amid fears of slowing economic growth worldwide.

Such fears have been accentuated by the US Federal Reserve’s resolve to hike interest rates sharply to curb inflation in the country and a deepening energy crisis in Europe.

For India, the strengthening dollar worsens the outlook on the current account deficit as the country is a substantial importer of crude oil, which is denominated in the US currency. Oil prices have been extremely volatile since the Ukraine war broke out in February, climbing to a 14-year high of $140 per barrel in March.

While prices have cooled off since then — a barrel of Brent crude last stood at around $105 per barrel – the current levels also exert significant pressure on India’s import bill and inflation.

Huge outflows of overseas investment from Indian financial amid higher returns in the US have further deepened worries over financing the current account deficit.

Foreign portfolio investors have sold a net $30.23 billion of Indian assets, more than three times the outflow for the whole of 2008, the year of the global financial crisis, the NSDL data showed.

A sharp decline in domestic equities also dragged the rupee lower on Tuesday. The BSE Sensex and the NSE Nifty50 closed 1 per cent lower each on Tuesday.

Dealers said that the RBI was likely to have intervened in the market through dollar sales around the 79.62-79.63 per dollar mark.

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