NEW DELHI – The rupee weakened sharply against the US dollar, hitting a fresh all-time intraday low, as weak economic data from China sparked fears of a global recession, eroding appetite for riskier emerging market currencies, dealers said.
The partially convertible rupee was last trading at 77.6790/$1, weaker than the previous all-time intraday low of 77.6250/$1 on May 12.
The Indian currency had opened at 77.8060/$1 as against 77.4500/$1. On May 9, the rupee had settled at a record closing low of 77.4650/$1.
“The risk-off mode continues to dominate the market, as the major recession fears were ignited after the Chinese retail data for April showed a contraction of 11%, the biggest fall since March 2020,” CR Forex Advisors MD Amit Pabari said.
Coupled with the US Federal Reserve’s aggressive plan to raise interest rates, the global wave of risk aversion brought about by the weak Chinese data ensured that the dollar index hovered near 20-year highs.
The US dollar index, which measures the greenback against six major rival currencies, was last at 104.18 as against 104.17 at the previous close. So far in 2022, the index has surged 9 per cent.
Higher US interest rates reduced the appeal of emerging market assets, while a depreciating rupee eats into the returns that overseas investors earn from their investments in India.
Foreign institutional investors (FIIs) have been relentlessly offloading Indian equities over the last few months, with their net sales at a whopping Rs 1.52 lakh crore so far in 2022.
Foreign institutional investors (FIIs) have been relentlessly offloading Indian equities over the last few months, with their net sales at a whopping Rs 1.52 lakh crore so far in 2022.
While currency traders expect the RBI to continue intervening in the foreign exchange market to curb excessive volatility in the rupee, the central bank is likely to permit an orderly depreciation in the currency, given the macro-economic fundamentals, dealers said.
"Domestically, at a time when global risk-off sentiments, higher oil prices and FII's outflows are weighing on the Indian rupee, RBI is supporting the currency by intervening across markets as the forex reserves decline for yet another week by $1.77 bn to $595.95 bn,” Pabari said.
“Its stance on inflation and interest rates still lacks clarity after losing its credibility, but it has made it very clear to prevent the one go slide in the Indian rupee from the start. Overall, we expect that RBI will allow a steady slip in the currency and we expect the pair to trade in the wide range of 76.50-78.50 in the short to medium term,” he said.
Source Name:-Economic Times