On Tuesday the rupee dropped to a record low of 80 per dollar for the first time in history. The currency opened on the day at 79.98 and immediately went to a record low of 80.0175 in early trade. However, it recovered after RBI’s intervention.
“The Indian rupee broke the level of 80 after many days’ failed efforts by the dollar bulls amid higher crude oil prices. However, the central bank’s intervention and stronger regional currencies and equities supported the rupee to erase early morning losses,” Dilip Parmar, Research Analyst at HDFC Securities, told PTI.
An increase in the trade deficit, the surge in crude oil prices and the ongoing outflow of foreign portfolio investors have kept the currency under pressure in recent times.
On July 18, Nirmala Sitharaman, Finance minister of India said in the Lok Sabha that The Indian rupee has declined by around 25% since December 31, 2014. Adding to this, global factors like the Russia-Ukraine conflict, skyrocketing crude oil prices and shrinking global financial conditions are the main reasons behind the fall of the rupee.
Around $14 billion has been withdrawn by the foreign portfolio investors from the Indian equity markets in 2022-23, and the main reason behind the depreciation of the Indian rupee is the outflow of foreign portfolio capital, the minister said.
“Pull back above 79.95 has negated the bear move, rendering the overall trend neutral, awaiting a directional push. The 79.95 regions will continue to be key, with 79.85-80.15, the narrow band in which USD-INR is expected to be in today,” said Anand James, chief market strategist at Geojit Financial Services.
“The Indian rupee is expected to open flat to weaker this Tuesday morning weighed down by outflows and high oil prices. Lack of intervention from the RBI could also weigh on sentiments. So, the rupee could open around 79.99-80.00 per dollar this Tuesday morning from 79.97/dollar close in the previous session. USD-INR pair range for the pair this Tuesday’s session is 79.75-80.12,” said Sriram Iyer, Senior Research Analyst at Reliance Securities.
In June, the nation’s merchandise trade deficit widened to $26.2 billion at a record high and in May it was $24.3 billion.