Rupee hits new record low of 78.29 against US dollar

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• Jun 22, 2022 | Dhupali Das

The dollar index, which measures the dollar's strength against a basket of six different currencies, increased by 0.5% to 104.48.

Digital Desk: Amid widespread weakness in emerging market currencies, the Indian rupee today hit a new record low of 78.29 against the US dollar. In the previous session, the rupee had a closing price of 78.13. Investors were alarmed by rising global interest rates and escalating inflation, which caused the dollar index to linger near two-decade highs of 104.507. The Sensex was down 700 points and close to its lows for the day. 

"The US Fed's aggressive rate hike plans are helping to bolster the dollar index and US bond yields. We anticipate that the dollar index will continue to strengthen and may test the 105 level once more in the coming sessions," said Rahul Kalantri, VP Commodities at Mehta Equities Ltd.

"On the other side, despite a rise in local equity markets, the rupee shown weakness. The US Federal Reserve's aggressive interest rate hike intentions and FIIs' ongoing sell-offs are exerting pressure on the rupee. Gains in the rupee are also being hampered by expanding trade imbalances and high crude oil costs. This week, we anticipate continued volatility in the rupee, which might lead it to challenge its 78.45 resistance level," he added. 

FIIs sold Rs. 2701 crore on Tuesday despite the Indian equities markets' recovery, bringing the monthly withdrawal to Rs. 41,000 crores, as per a report from CR Forex Advisors. 

With economic downturn worries growing and central banks raising interest rates to combat decades-high inflation, stocks and oil prices fell today on the worldwide market. Currency traders will be expecting Federal Reserve Chairman Jerome Powell's two-day appearance before Congress this week to get an indication of how officials intend to stop price inflation. After announcing a rate increase this month that was the highest in nearly 30 years, most analysts anticipate that the Fed will increase rates dramatically many more times this year.

"While the Euro and the Pound remained in a range, the US dollar index bounced back from its low below 103.75 levels. On the other hand, the yen's value against the dollar hit a new 24-year low. Oil prices have decreased by roughly 9% and natural gas prices by 10% in the energy sector over the past week. Aside from that, there has been selling pressure on major commodity prices as concerns about a recession have impacted the forecast for demand. If other factors follow suit, this might develop into a significant positive for the rupee. Before giving a breakout on either side, one can anticipate that the pair will often trade in a range between 77.80 and 78.30 levels," it added.

Reportedly, due to ongoing withdrawals of foreign funds and losses in domestic equities, the rupee fell by 27 paisas to a record low of 78.40 (provisional) against the US dollar on Wednesday.

As per FX traders, a higher dollar abroad also hurt the prospects for the rupee. However, they continued, the loss to the currency was limited by falling crude prices on the global market. 

The local currency opened flat at 78.13 against the dollar on the interbank foreign exchange market, with a high and low for the day of 78.13 and 78.40, respectively.

The dollar index, which measures the dollar's strength against a basket of six different currencies, increased by 0.5% to 104.48.

The benchmark for world oil, Brent crude futures, fell 4.46 percent to USD 109.54 a barrel.

In terms of domestic equities, the broad NSE Nifty dropped 225.50 points or 1.44 percent to 15,413.30, while the BSE Sensex closed 709.54 points or 1.35 percent lower at 51,822.53.

According to stock exchange data, foreign institutional investors continued to be net sellers in the capital market on Monday, selling shares worth 2,701.21 crores.