Rupee plunges to new low at 77.85

Amid rising crude oil prices and the Reserve Bank of India’s upward revision of the inflation target, the rupee plunged to an all-time low of 77.85 against the dollar on Friday. Risk averse sentiments leading to a strong selloff in the domestic equity markets, surging US yields and a strong dollar also weighed on the domestic unit.

At the interbank foreign exchange market, the local currency opened at 77.81, traded weaker and directionless, as risk sentiment got affected. The local unit finally settled at 77.85, down 11 paise over its previous close of 77.74. The rupee marked a new low as the central bank did not intervene while importers rushed for dollars.

Gaurang Somaiya, forex and bullion analyst at Motilal Oswal Financial Services, said, “Rupee hit its fresh all time low but in the last few sessions has been very resilient and is consolidating in a narrow range despite volatility in domestic and global equities and strength in the dollar against its major crosses. Global crude oil prices have been rallying thereby putting pressure on inflation and leading to higher trade deficit. Dollar is getting support at lower levels ahead of the US inflation number that will be released today and FOMC policy statement that is scheduled next week. Expectation is that the Fed could continue to raise rates and maintain its hawkish stance. We expect the USD-INR (spot) to trade with a positive bias and is gradually headed towards 78.50 levels. On the downside, 77.20 will continue to act as an important support in the short term.”

Jateen Trivedi, vicepresident-research analyst at LKP Securities, said, “The rupee felt the pressure as dollar prices trade above $103.50 and crude prices holding above $120 in both Brent & Nymex. The rupee can be seen in the range of 77.7578 given the current situation, Core CPI data of the US will give further cues for the range on rupee and dollar index.”

The Dollar Index, which gauges the greenback's strength against a basket of six currencies, rose 0.20 per cent to 103.43. Brent crude futures, the global oil benchmark, advanced

0.51 per cent to $123.70 per barrel. The basket of crude oil that India buys has hit a decade high of

$121 per barrel. The Indian basket on Thursday had touched $ 121.28, matching levels seen in February/ March 2012.