Rupee Weakens On Rampant Dollar, A Session After Its Best Gains In A Year

Rupee Weakens On Rampant Dollar, A Session After Its Best Gains In A Year

Rupee weakens to 79.55 per dollar

The rupee weakened on Thursday as a surging dollar pinned down major currencies as hawkish drumbeat from central banks and a lockdown in China further frayed investor nerves.

Bloomberg showed the rupee last changing hands at 79.5475 per dollar, compared to its previous close of 79.4588 on Tuesday.

PTI reported that the Indian currency slipped 4 paise to close provisionally at 79.56 against the US dollar.

Reuters reported that the rupee held its ground on Thursday, as weakening oil prices and exporters selling dollars shielded it from a selloff in global risk assets.

The partially convertible rupee eased 0.1 per cent to 79.5550 per US dollar, having firmed up to a more than two-week high of 79.31 during the session. The currency closed at 79.45 on Tuesday, according to Reuters.

While Asian equities and currencies tumbled as the dollar index shot up on escalating bets that the Federal Reserve would keep rates high, but the rupee markedly stood out for not declining as much.

 “The Indian rupee outperformed its Asian peers following lower crude oil prices and exporters selling dollars. That even as news of Russia considering buying as much as $70 billion in yuan and other ‘friendly’ currencies for reserves this year, supported Asian Currencies somewhat,” said Dilip Parmar, Research Analyst, HDFC Securities.

On Wednesday, Indian stock, currency and money markets were closed on account of Ganesh Chaturthi, a day after soaring to mark several key milestones.

On Tuesday, the Indian rupee notched its biggest one-day gain in a year against a wobbly dollar as domestic equities saw a rush of foreign investor inflows.

Reuters reported that the rupee had its best session in a year on Tuesday, which traders attributed to a fall in long dollar positions and renewed chatter about the inclusion of Indian bonds into global indices.

Government data on Wednesday showed India’s economy expanded by a robust 13.5 per cent in the June quarter from a year ago, but below what was widely expected by the RBI, analysts and economists, with risks tilted more to the downside in the current fiscal year.

Asian currencies were broadly lower on Thursday after data showed Asia’s factory activity slumped in August as China’s zero COVID curbs and cost pressures continued to hurt businesses, surveys showed on Thursday, darkening the outlook for the region’s fragile economic recovery.

Tuesday’s “against-the-trend” rally on the rupee “was surprising, to say the least”, a dealer at a Mumbai-based bank told Reuters. Still, the rupee remains in a firm downtrend, and “it is most likely” that the Tuesday session “was an aberration.”

The US currency rose broadly on Thursday, with the dollar index hovering near 109, with risk aversion and high Treasury yields boosting the demand for the safe haven dollar, driven by weak economic data and aggressive rate hike bets.

But the rupee received some support from the slump in crude prices as the country imports over three-fourths of its oil needs.

Oil prices fell on Thursday, led lower by increased supply and worries that the global economy could slow further.

“One of the reasons for the (rupee’s) positivity is lower crude oil prices as they’re down 2.5 per cent. In addition, some exporters may have sold dollars, and due to these things the rupee is slightly on the right side,” said Dilip Parmar, research analyst at HDFC Securities, told Reuters.

He added that 79.90 could be a support level for the rupee and 79.85 a resistance, but bias for the currency is on the positive side as a host of recent data has been encouraging.

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