The Indian currency rupee opened marginally weaker on Tuesday, extending losses for the third straight session as the impact on economic growth concerns from policy tightening by central banks sapped risk appetite, with investors sheltering in safe-haven assets.
PTI reported that the Indian currency fell 4 paise to 79.88 against the US dollar in early trade after the rupee recovered early losses to close flat at 79.84 on Monday, despite a strong greenback overseas and massive sell-off in equities.
At the interbank foreign exchange, the rupee opened at 79.85 against the dollar, then fell to 79.88, registering a decline of 4 paise over the previous close of 79.84, according to PTI.
“The rupee could continue to extend losses in the week and possibly test new lows on prospects that the US Federal Reserve will continue to deliver large rate hikes,” Sriram Iyer, Senior Research Analyst at Reliance Securities, told PTI.
Moreover, worries about inflation could also keep the local unit under pressure. However, the presence of the Reserve Bank of India (RBI) could cap losses in the domestic unit.
Reuters quoted the rupee at 79.8450 per dollar, compared with 79.8675 in the previous session.
The local currency has dropped for three straight sessions and is close to its all-time low of 80.0650 last month.
Bloomberg showed the Indian currency was last changing hands at 79.8712, compared to 79.8687 in the previous session, with the rupee trading in 79.8150 to 79.8800 range.
The rupee remains in a downtrend, but the momentum on the downside will likely only build once the rupee makes a new record low, a trader at a Mumbai-based bank, told Reuters.
“The likelihood of RBI stepping in will keep speculators from building new long positions (on USD/INR) till rupee remains above 80,” the trader added.
The RBI has started selling dollars to protect the rupee from the volatility brought on by the aggressive rate hike path by the US Federal Reserve. India’s foreign exchange reserves have fallen to their lowest since November 2020 and down by more than $60 billion since Russia invaded Ukraine.
Lower demand for risk assets was influenced by worries that central banks’ tightening policy to combat pricing pressures might trigger an economic collapse.
Indeed, Indian equity benchmarks fell for the third day in a row on Tuesday, tracking weak Asian bourses, which were down for a sixth straight session after a renewed spike in European energy prices stoked fears of recession and unease over China’s economy.
The dollar held firm on Tuesday on safe-haven flows. At the same time, the euro languished around a two-decade low as investors braced for a hard winter in Europe as it grappled with energy supply and broader economic growth concerns.
“The dollar index started marginally weaker this Tuesday morning in Asian trade but downside remained capped on safe haven flows,” Reliance Securities’ Mr Iyer said.
The euro touched its lowest since late 2002 at $0.9926 overnight and was barely higher at $0.9939.
Asian currencies too declined on Tuesday. The offshore Chinese yuan fell to 6.8748 to the dollar.
Meanwhile, according to preliminary BSE data, foreign investors turned net sellers of Indian equities on Monday.
But crude oil climbed as renewed concerns over tight supply dominated market sentiment after Saudi Arabia warned that the major oil producer could cut output to correct a recent oil price decline.