MUMBAI: The Indian rupee on Wednesday touched record lows for a second straight session on persisting concerns about rising inflation and weak growth, even as the central bank sold dollars to limit losses.
The partially convertible rupee ended at 78.9650/9750 per dollar after touching a lifetime low of 78.97. The currency had closed at 78.77 on Tuesday.
“There was sporadic intervention even today and that helped avoid a breach of 79 on the USD/INR in today’s session. But the RBI (Reserve Bank of India) cannot prevent the depreciation which is in line with what is happening globally,” a senior trader at a foreign bank said.
RBI could make greater use of spot market intervention - which would run down central bank reserves - or may just opt to let the rupee weaken according to macroeconomic fundamentals, analysts and traders believe.
“We believe depreciation pressure on INR would continue to persist in FY23,” QuantEcon Research said in a note, adding that it expects “INR could weaken towards 81 to a dollar before the end of FY23.”
Indian shares fall; crude producers jump on sale deregulation
The rupee has lost more than 6% against the dollar so far this year, and analysts believe it is likely to weaken further.
“The Indian Rupee has been adversely affected mainly by the FIIs pulling out funds from the equity market, rising crude prices, the deteriorating trade balance and dollar strengthening,” analysts at Emkay Wealth Management said in a note.
Foreign institutional investors have sold local shares worth $28.4 billion so far in 2022 and dumped bonds worth $2.3 billion.
Indian shares fell after a four-session rally, as worries about high oil prices and inflation returned to the forefront.
Asian currencies and stocks fell as weak U.S. economic data dented risk sentiment and overshadowed optimism around the easing of some COVID-19 restrictions in China.
Comments
Comments are closed.