the Indian Rupee It hit a record low on Friday amid a firming dollar and continued outflow of foreign funds from the local market and a rise in global crude oil prices. The currency closed at a new all-time low of 77.85 (provisional) on Friday, down 11 paise. U.S. Dollar, During the trading session, the domestic currency touched its lifetime low of 77.93. The rupee has lost 21 paise against the greenback during the week. However, the dollar index rose 0.20 per cent to 103.43.
Rupee has come under a lot of pressure after Russia’s invasion Ukraine in February. The Indian currency has depreciated by 2.64 per cent against the dollar in the current financial year. Selling in the domestic market in recent weeks pulled the currency further.
Foreign institutional investors have pulled out Rs 2.5 trillion from domestic equities since October 2021. Rising crude oil prices and supply disruptions after the Russian invasion of Ukraine put more pressure on the Indian unit.
Speculation of an aggressive rate hike by the US Federal Reserve lifted the US dollar index and Treasury yields. Both these factors played a major role in the depreciation of the domestic currency, said Heena Imtiaz Naik, Research Analyst (Currency), Angel One Ltd.
What’s next for the rupee: Will it fall further?
Analysts said the rupee may cross the 78 level against the dollar in the next few sessions on weak fundamentals. “We expect the rupee to cross the spot 78 level in the coming days due to weak fundamentals. Rising commodity prices, especially crude, could further widen the trade deficit, which has already risen to a record $23.3 billion in May 2022. Meanwhile, an aggressive Federal Reserve rate hike cycle could increase capital outflows, which could widen the balance of payments. Looking ahead in the current financial year,” said Jigar Trivedi, Research Analyst, Commodities and Currency Fundamentals, Anand Rathi Shares & Stock Brokers.
Possibilities of Intervention by Reserve Ban India Trivedi said that (RBI) is fixing a limit of Rs.
“RBI has been very cautious in the past to cut losses on the rupee and still, RBI remains a seller on higher levels, but if the pair continues to trade above 77.80-77.90, there will be a higher risk of depreciation in the rupee. rate may not be. Viraj Vyas, Technical and Derivatives Analyst, Ashika Group explained.
Investors will eagerly follow the US Federal Open Market Committee meeting on June 22. “For the rupee, the key psychological level would be at 78.30. Once the US and its side effects are over, we can see the rupee moving downwards,” Naik said.
“We expect USD INR (Spot) to trade with a positive bias and is gradually moving towards 78.50 levels. Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, said, “Downside 77.20 will continue to act as an important support in the short term.
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