Mumbai: The rupee on Monday breached the 80-to-a-dollar mark to hit a fresh record low of 80.13 in early trade, but suspected dollar selling by the Reserve Bank of India (RBI) arrested its decline and helped it close at 79.96 level.
According to sources, the RBI sold half a billion dollars through the public sector banks to arrest the rupee’s fall. The US dollar surged to a 20-year high against a basket of currencies after Federal Reserve chair Jerome Powell signalled that interest rates would be kept higher for longer to bring down soaring inflation. The probability for the Fed to hike its Fed funds rate by 75 bps has gone up to 68.5 per cent, said reports.
“We expect the rupee to stay at 80 levels as any appreciation beyond the current level looks difficult as oil has rallied again which may be another negative to watch out for,” said Bhaskar Panda, senior vice-president, treasury advisory at HDFC Bank.
Anindya Banerjee vice-president-currency derivatives at Kotak Securities said, “A strong US Dollar Index, high US bond yields with a deeply inverted yield curve and weak equity markets all make it challenging for foreign portfolio investors and carry trade flows in emerging markets. However, the speed of the up move will be closely regulated by the RBI. The RBI has the twin objectives of not letting the rupee become a weak outlier and also, they do not want the USDINR to become too volatile. This means they may continue to sell USD as the spot and forwards moves to a fresh all-time high. However, this may not alter the trajectory of the pair and the path of least resistance would remain upward. We expect a range of 79.70 and 80.50 over the next one-two weeks.
At the interbank foreign exchange market, the local currency opened at 80.10 and fell to its all-time low of 80.15 against the US dollar in intra-day trade. The local unit finally settled at 79.94 a dollar, down 10 paise over its previous close of 79.84.
On July 20, the rupee for the first time had closed below the 80-mark at 80.05 against the dollar. Meanwhile, the Dollar Index, which gauges the greenback's strength against a basket of six currencies, was trading 0.28 per cent higher at 109.10.
