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At 80.86, Re dives to new low against dollar

The rupee fell 90 paise to a record low of 80.86 against the dollar on Thursday after the US Federal Reserve hiked its interest rates by 75 basis points and hinted at further hikes in the future. Against the greenback, which opened weak at 80.27 compared to its previous close of 79.96, the rupee fell to an all-time intra-day low of 80.95 before ending at 80.86.

On Thursday, foreign institutional investors sold shares worth Rs 2,509.55 crore in the domestic capital market, according to data available on the BSE.

Experts said that after the Fed’s move, the dollar index is likely to gain significantly and major market currencies, including the rupee, will remain under pressure.

“The Federal Reserve sounded very dodgy. After that, the US dollar rose significantly against almost all currencies, and the rupee had to respond,” said Anindya Banerjee, Vice President, Currency Derivatives and Interest Rate Derivatives, Kotak Securities Ltd.

“If we start seeing rupee depreciation, then from a USD return perspective for FPIs, India becomes attractive. We may also witness a reversal in FPI inflows in the near to medium term, which will add to market volatility,” said Naveen Kulkarni, chief investment officer, Axis Securities PMS.

He added that higher interest rates in the US would force major central banks, including India, to raise interest rates to prevent pressure on their domestic currencies, and market multiples could contract with increased interest rates and cost of capital.

Meanwhile, equity indices retreated for the second consecutive session on Thursday. The Sensex ended down 337.06 points, or 0.57 percent, at 59,119.72 and the Nifty ended down 88.55 points, or 0.50 percent, at 17,629.80.

Despite the fall in the past few months, the rupee has fared better than other major currencies, experts said.

In a speech on September 5, Reserve Bank of India (RBI) Governor Shaktikanta Das said that so far this year, the rupee has moved in an orderly fashion and has held its own in a world of sharp depreciation among other emerging market economies. currency of the economy. “While the US dollar has appreciated by 11.8 per cent in the current financial year, the rupee has depreciated by 5.1 per cent so far, which is among the lowest in the world,” he said.

Although the Reserve Bank continues to intervene in the foreign exchange market, it has always maintained that the aim is to prevent exchange rate volatility and not to target any fixed level. Forex traders suspect that the RBI has intervened in the forex market at 80.80-80.85 levels on Thursday, which helped the rupee rise by 20 paise in the trading session. However, by the end of the session, it had lost those gains, they said.

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RBI is selling dollars from forex reserves to maintain rupee stability. From April 1 to September 9, the RBI used about $55 billion from the forex kitty.

“Acknowledging the fact that there is a real shortage of supply of forex in the market compared to demand due to import and debt servicing requirements and portfolio outflows, the RBI is supplying US dollars to the market to ensure that there is sufficient forex. Liquidity,” Das said during a speech in July. “After all, this is the purpose for which we accumulated reserves when capital inflows were strong. And, might I add, you buy an umbrella to use when it rains!”

Forex market participants will focus on the next big event, RBI’s monetary policy decision on September 30.

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