₹ closes below 80-mark for the first time against US dollar
MUMBAI: The rupee for the first time dropped below the 80 level against the US currency on Wednesday due to strong dollar demand from importers and fiscal slippage concerns.
Crude oil prices remained above the $105 per barrel mark despite a correction while fiscal slippage concerns after the government reduced the windfall tax on the export of oil products hit the rupee sentiment.
The local unit closed at a record low of 80.05 to a dollar, showing a net loss of 13 paise over the previous close.
The rupee had breached the 80 level to hit a low of 80.05 in intra-day trade on Tuesday but settled at 79.92 to a dollar due to suspected RBI intervention and forex inflows.
At the interbank foreign exchange market, the local currency opened at 79.91 and later traded in a range of 79.89 to 80.05.
Forex traders said significant dollar demand from oil importers, firm crude oil prices, as well as concerns about swelling trade deficit, weighed on investor sentiments.
“Overall gains in crude in the last few days where Brent has risen again above $105 and lack of intervention from RBI has kept the rupee hovering around 80.00. Going ahead rupee will be seen in the range of 79.75-80.25,” said Jateen Trivedi, VP Research Analyst at LKP Securities.
The rupee is broadly in downtrend even after measures from the RBI on international payment gateways or import duty hikes on commodity products, Trivedi said.
India’s forex reserves stood at $580.252 billion, down by $27.05 billion from March-end 2022.
“As the dollar index has shown a correction from 109 to 106.50 in a span of week which will hold the rupee’s drop in majority,” he said.
“Rupee opened in the green on a weak dollar and a surge in domestic equity markets. However, concerns over twin deficits capped sharp gains,” said Anuj Choudhary — Research Analyst at Sharekhan by BNP Paribas.
Choudhary further said rising current account deficit and trade deficit may put pressure on the rupee.
“Dollar may also strengthen again on expectations of an aggressive rate hike by the Fed later this month,” Choudhary said, adding that USDINR spot price is expected to trade in a range of Rs 79.20 to Rs 80.80 in the next couple of sessions.
According to Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, the rupee consolidated in a narrow range and focus will now be shifting to the Federal Open Market Committee (FOMC) next week.
The Euro rose after reports that the European Central Bank (ECB) is considering a bigger rate hike.
The pound also rallied after a better-than-expected employment number. Britain’s unemployment rate held at 3.8 per cent in the three months to May, while the number of people in work rose by the most since the middle of 2021, Somaiya said, adding: “We expect the USDINR (spot) to trade in the range of 79.70 and 80.20 in the short-term.”