Mumbai: The rupee on Friday registered the steepest fall in almost two years to hit its lifetime intraday low of 85.80 before a suspected central bank intervention helped recover some of its losses and settled 21 paise lower at a record low of 85.48 against the US dollar due to a strong greenback amid increased month-end demand from banks and importers.
According to analysts, the Reserve Bank's stance to hold on to its dollar payments in short-term forward contracts added to the shortage of greenback, with importers rushing to meet their month-end payment obligations. They said that despite robust sentiment in domestic equity markets, the rupee was weighed down by sustained outflow of foreign funds and rising crude oil prices.
"At the interbank foreign exchange, the rupee opened weak at 85.31 and plunged 53 paise to the lowest-ever intraday level of 85.80. The unit finally ended the session at 85.48 against the greenback, losing 21 paise from its previous closing level of 85.27. The rupee's earlier sharpest one-day fall of 68 paise was recorded on February 2, 2023. The rupee's drop was driven by rising US bond yields, which increased the dollar's attractiveness," Religare Broking Ltd. SVP Research, Ajit Mishra said and added that Foreign institutional investors shifted their investments away from Indian equities, counting further pressure on the rupee.
ALSO READ: UltraTech To Acquire Minority Stake In Star Cement From Promoters In Rs 85-Crore Deal
"The Reserve Bank of India has been actively intervening to stabilize the currency, with net forex market sales of USD 9.28 billion in October. However, these efforts have not been enough to counter the impact of rising US Treasury yields and elevated crude oil prices," Ajit Mishra added.
Rupee Hits Record Lows Amid Dollar Scarcity, Rising Oil Prices, FII Outflows
The domestic unit has been hitting new lows almost every day in the past couple of weeks. It had plunged 12 paise to 85.27 against the dollar on Thursday after declining 13 paise in the previous two sessions. "The central bank holds USD 21 billion in short-side forward contracts set to mature in December and January. Market speculation suggests that the RBI has refrained from rolling over these maturing forwards, leading to a scarcity of dollars and an oversupply of rupees.
Rupee hits lifetime low, settles at 85.48 against dollar.
"Moreover, dollar liquidity in the market remains very low, amplifying the upward momentum in the pair. This imbalance has propelled the USD-INR pair towards 85.8075 levels," CR Forex Advisors Managing Director Amit Pabari said. According to Mirae Asset Sharekhan Research Analyst Anuj Choudhary, the rupee hit a record low on dollar demand from importers towards the end of the month and outflows from foreign investors (FIIs). "Rising US treasury yields and crude oil prices also weighed on the rupee," he said and projected the USD-INR spot price in a range of Rs 85.30 to Rs 85.85, saying traders may take cues from goods trade balance data from the US.
ALSO READ: स्टक ब्रकिं फार्म च'इस इन्टारनेशनेलआ MF फालांगिनि थाखाय SEBI नि खान्थियारि गनायथि मोनबाय
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.04 per cent at 107.94, while the 10-year benchmark US Treasury yield rose 0.76 per cent, hitting its seven-month high level of 4.61 per cent. Global oil benchmark Brent crude rose 0.15 per cent to USD 73.37 per barrel in futures trade. In the domestic equity market, the 30-share BSE Sensex settled 226.59 points or 0.29 per cent higher at 78,699.07 points, while Nifty went up 63.20 points, or 0.27 per cent, to close at 23,813.40 points. According to exchange data, Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Friday, as they offloaded shares worth Rs 1,323.29 crore.
FIRST Business Portal addressing the potential of business capability of North East Region.
