Rupee's fall extends as currency hits new record low; all focus now on RBI intervention
Premium- The rupee has lost over 7% of its value in 2022
The rupee continued to weaken and fell 1 paisa to an all-time low of 80.06 on Thursday, tracking losses in most other Asian peers but traders expect dollar-selling intervention by the Reserve Bank of India (RBI) to limit losses. The rupee, that has been hitting fresh lows since the past few sessions, declined to the low level of 80 for the first time on Tuesday. The rupee has lost over 7% of its value in 2022 (YTD).
US dollar rose yesterday amid surge in US treasury yields. Further, demand for safe haven increased ahead of major events like ECB monetary policy, as per analysts.
“Rupee is expected to depreciate today amid strong dollar, rise in crude oil prices and risk aversion in the global markets. Additionally, investors will remain vigilant ahead of major central bank monetary policy meetings. Investors fear that monetary tightening across major countries to tame stubbornly high inflation may lead economies into recession. US$INR (July) is expected to trade in a range of 79.85- 80.30," said ICICI Securities.
Investors will watch out for the central bank after a report by Reuters suggested that the RBI was prepared to sell another $100 billion to defend the rupee from rapid falls.
The RBI's currency reserves have fallen by more than $60 billion from its peak of $642.450 billion in early September, in part due to valuation changes, but largely on the back of dollar selling intervention.
They have shown that they will use reserves at will to prevent volatility in the rupee. They have the wherewithal and have demonstrated the willingness to use it. The RBI can afford to spend even $100 billion more if required to defend the rupee," a source told Reuters.
"It is a clear sign that global investors are choosing the safety of US markets over the recession risks of the EU. The impending threat of Russia cutting off gas supplies in winter coupled with the slow intervention by the ECB to control inflation, means that the recession in the EU looks imminent. Hence investors are selling Euros and buying dollars. As an Indian investor, one would be well advised to dollarize their investments as even rupee is expected to decline further this year," said Asheesh Chanda, Founder & CEO, Kristal.AI.
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